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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED AUGUST 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-20060
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NORAND CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 42-1323151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 SECOND STREET S.E.
CEDAR RAPIDS, IOWA 52401
(Address of principal executive offices) (Zip Code)
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(319) 369-3100
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of November 8, 1996, based on the last reported sale price on that
date on the Nasdaq National Market of $17.75 per share:
COMMON STOCK-$.01 PAR VALUE-$132,611,777*
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of November 8, 1996.
COMMON STOCK-$.01 PAR VALUE-7,664,621 SHARES
* Based on reported beneficial ownership by all directors and executive officers
of the registrant; however, this determination does not constitute an
admission of affiliate status for any of these individual stockholders.
Page 1 of . Exhibit index at page .
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PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
Norand Corporation, a Delaware corporation, was organized in 1988 as the
successor to a business established in 1968. In February 1993 Norand completed
an initial public offering of 4,025,000 shares of its common stock. Norand's
principal executive office is located at 550 Second Street Southeast, Cedar
Rapids, Iowa 52401. Norand's telephone number is (319) 369-3100. Unless the
context indicates or requires otherwise, references in this Form 10-K to
"Norand" or the "Company" are to Norand Corporation and its subsidiaries.
Norand designs, develops, manufactures, markets and services mobile
computing systems and wireless data communication networks using radio frequency
technology. These systems automate the collection, processing and communication
of information related to product sales and distribution, inventory control and
warehouse data management. Norand systems include hand-held computers and radio
frequency terminals as well as a variety of other hardware devices;
application-specific software; communication networks; systems integration and
support services; and related peripheral items including portable printers and
bar code scanning devices.
Norand has continued to invest in a variety of enabling technologies (such
as application software and network communications systems) that support its
systems solution approach. Norand has spent over $120 million on product
development and engineering expenses since October 1988 to transform the Company
from a hardware product-oriented company to an integrated systems solutions
provider.
MARKETS
Mobile Computing Systems
The mobile computing systems market consists of several applications, such
as: route accounting, sales merchandising, remote delivery and field service.
These applications are used in the consumer products, food, beverage, wholesale,
parcel delivery, freight, field service and home service industries.
Route accounting involves concurrent order taking, product delivery and
inventory tracking. Salespeople use Norand's systems to enter customer orders
into hand-held computers which use Norand portable printers to generate invoices
that are left with the customers' orders at their retail locations. At the end
of a route delivery day, information stored in hand-held computers is
electronically transferred to host information systems, and instructional and
control information for the next day's routes is downloaded back to the hand-
held computers.
Field service applications are similar to route accounting applications. A
service is delivered instead of products. For example, Norand computers are used
as productivity tools in the pest control industry to keep track of sales
activity and service delivery. Sales merchandising applications pertain to
suppliers, primarily in the food and consumer product industries, who gather
information regarding comparative sales and administer sales promotions at the
retail level. Information gathered is also used to reconcile inventory and
product deliveries with cash collections. Remote delivery applications are
similar to route accounting applications; however, products are not immediately
delivered to customers as they are in route accounting applications. Rather,
order information is entered into portable hand-held computers and later
transferred to host information systems. This information is used to produce
master schedules, pick lists, shipping instructions and invoices.
Radio Frequency Systems
The radio frequency ("RF") systems market is comprised of manufacturing,
warehousing and distribution center and retail applications. Norand focuses on
the use of RF technology and bar code scanning in its
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systems targeted for this market which requires real-time information exchange
and processing. Manufacturing applications include the collection and
communication of information related to receipt of materials, work-in-progress,
finished goods inventory and other functions throughout the manufacturing
process. Warehousing and distribution center applications involve the collection
and communication of information related to receiving materials to be stored,
storage locations, materials retrieval and shipping. Retail applications include
the automation of price verification, shelf label maintenance and product
receiving functions.
International
International sales opportunities exist in countries where mobile computing
systems market practices and other applications are similar to the U.S.
Opportunities within the food and beverage industries exist in Canada, Mexico,
South America, Australia and Europe. Additional opportunities exist to service
the international operations of Norand's multi-national U.S. customers. The
extent of RF systems opportunities in any particular country is based on the
level of industrialization, the status of bar coding implementation and the RF
regulatory environment.
PRODUCTS AND SYSTEMS
Norand has developed a broad line of products and systems for the mobile
computing systems and RF systems markets. Norand systems generally combine
applications-specific software, data communication networks, portable and mobile
key-pad and pen-based hand-held computers, portable and mobile printers, bar
code scanning devices and related peripheral equipment. Norand's current product
development efforts include advanced communication networks, further integration
of RF technology, application software development technologies, advances in
portable computers and automatic identification technology integration.
Mobile Computing Systems
The principal components of a typical Norand mobile computing system
incorporate industry application-specific software such as Route-commander(R)
programs for automating route accounting, data communication networks with
integrated battery charging docks, hand-held computers, portable and mobile
printers for printing invoices at the delivery location and related peripheral
equipment.
Remote delivery, sales merchandising and field service systems typically
include applications-specific software, remote communications components, such
as modems, hand-held computers and receipt or label printers.
Applications-Specific Software. Applications-specific software modules are
designed for salespeople or specific operations. Remote user applications, such
as the Route-commander(R) application, include complex unit pricing, promotion
schedules, invoice printing, inventory tracking and reallocation, truck routing,
sales histories, cash reconciliation, exception reporting, load control, product
forecasting and route control functions. Remote site applications include file
and data management, communications control and consolidated results reporting.
Many of Norand's application software programs are industry specific as well as
customer specific.
Data Communications Networks. A sophisticated communication controller with
an integrated battery charging dock provides network interfaces, communication
control and the overnight charging of hand-held computer batteries.
Communications sessions may be run simultaneously with each docked computer,
multiple depots and the customer's host information systems.
Hand-Held Computers. Each system typically includes hand-held computers
that incorporate microprocessors, memory (SRAM, DRAM, and ROM), displays,
keyboards, battery packs and power management circuitry. The system also
includes operating system programs and software that tailor the data collection,
retrieval and mobile computing capabilities to the specific application. The
computer is contained
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in a rugged, ergonomically designed case which fits conveniently in the user's
hand and is designed to withstand heavy industrial use.
Portable and Mobile Printers and Peripheral Equipment. Portable and mobile
printers are an integral part of Norand's system configurations and include a
variety of technologies. Norand printers are designed to accommodate special
applications and environmental demands, such as vehicular power surges and
exposure to moisture and extreme temperatures. Other peripheral equipment
includes sophisticated two-way controllers, modems and unique,
applications-specific packaging.
Radio Frequency Systems
Typical RF systems include data communication networks using wireless
system networks, host and distributed network links, rugged hand-held and mobile
computers and applications-specific peripheral equipment. Customers in the RF
systems market use Norand systems in manufacturing, warehousing and distribution
center and retail applications, each of which typically requires real-time
interactive information exchange. The information flow facilitated through such
networks can help improve workforce allocation, inventory accounting, order
filling and process management by automating order processing, materials
movement, and logistics.
Data Communication Networks. Norand's data communication and wireless
networking expertise allows for the design and implementation of expandable and
scaleable systems that seamlessly integrate with customers' existing host
information networks. Norand designs wireless networks that maximize data
throughput and performance, and emphasize fault tolerance and data integrity.
These capabilities are accomplished through sophisticated protocols,
communication software layers, industry standard interfaces, communications
hardware and integrated RF data radios. The requirements and sophistication of
Norand networks increase with greater demand for data transfer speed,
reliability, mobility and fault tolerance of these increasingly mission critical
applications.
Host and Distributed Network Links. The wireless communications link with
hand-held computers uses radio base stations/access points and controllers,
which, for smaller systems, may be integrated into a single unit. A base station
converts the radio signals received from terminals to digital signals
recognizable by the host information system. A base station also converts data
generated by the host information system to radio signals for transmission to
the hand-held computers. Norand offers a range of base station radio hardware
that may be distributed throughout a facility to enable communications with a
large number of hand-held computers. These products enable Norand to provide
reliable radio coverage of both small and very large areas and/or multiple
buildings. Norand radio products include products used in wide area
communication network applications such as field sales automation.
Norand base stations and hand-held computers incorporate radios designed or
selected by Norand to meet its specifications. The radio component is either
purchased from external sources or manufactured by Norand. Because Norand
designs its own radios, it is able to produce radios with low power usage and
size configurations that permit the radios to be physically integrated into
terminal units rather than being separately packaged. This is important for
customers who require special radio designs to meet applicable country
regulatory requirements.
Norand communications controllers provide RF network management in addition
to offering an interface to various customer host computer networks. Norand
networks are designed to provide connectivity to all industry standard host
information system architectures, including IBM's 3270 and 5250 terminal
emulation protocols, DEC's VT 220 and Ethernet connections employing TCP/IP
protocols used in non-IBM host networks.
Through multiple layers of communications protocol support, Norand network
controllers handle numerous linkages with intelligent base stations,
communication docks, portable computers and additional system nodes creating an
advanced network that maximizes speed, coverage and network availability. Norand
systems communicate and interface with multiple host information systems and
provide for remote diagnostics access. Norand's RF systems utilize both UHF and
spread spectrum radio technologies ("SST"). Narrow-
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band UHF systems have system cost and coverage range advantages. SST-based
systems offer faster data transfer speed advantages and do not require special
site licensing.
Hand-Held and Mobile Computers and Application-Specific Peripheral
Equipment. Norand systems include rugged hand-held and vehicle-mounted computers
that incorporate microprocessors, integrated RF data radios, memory, displays,
keyboards, integrated bar code scanners and power management circuitry. Mobile
terminals typically draw their power from forklifts, high lifts, or other mobile
materials handling equipment on which they are mounted. Cases and mounting
hardware are designed for extremely harsh environments including forklift and
other mobile platform vibrations. Hand-held computers contain their own
rechargeable, replaceable battery. Applications-specific peripheral equipment
includes industrial bar code scanners, bar code printers, battery pack chargers
and large displays for forklift operations.
CUSTOMERS
Norand markets its mobile computing and RF systems primarily to medium-size
and large corporations worldwide. No single customer accounted for 10% or more
of Norand's product revenues in any of the last three fiscal years.
SALES AND MARKETING
Norand sells and distributes its systems and products worldwide through
multiple channels. Norand uses three sales and distribution channels: a direct
field sales force which concentrates on large, complex systems sales; value
added resellers ("VARs") that offer applications-specific solutions; and major
systems integrators, such as IBM, that market Norand's products. Each channel
adds value to the sales and installation process by assisting in the design and
integration of Norand systems at the end user level. Regardless of the channel,
the integration of a successful system requires definition of end user
requirements, specification of interfacing and system connections, network
integration and radio network coverage considerations, careful project
management and, in many mobile applications, development of application
software. The direct sales force manages the activities of all distribution
channels, typically on both a geographic and an application-specific vertical
market basis.
Direct Field Sales Force
As of October 31, 1996, Norand had 197 employees in its worldwide field
sales group. The direct sales organization focuses on selling to major accounts
and supporting systems integrators and VARs. Included in this organization are
sales executives, systems engineers and major account project managers, who work
in teams to define customer requirements and install and implement systems that
are customer specific. The sales force is organized into segments that
correspond to Norand's major target markets. Field sales force responsibilities
include pre-sales efforts, system installation and implementation, and
post-sales support.
In North America, Norand has field sales offices in 14 cities in the United
States, Canada, and Mexico. Additionally, Norand has field sales and support
offices in the United Kingdom, Germany, Spain, Italy, the Netherlands, Denmark,
Sweden and Australia.
Value Added Resellers and System Integrators
Norand products are distributed through a select group of VARs and system
integrators that provide value to sales, system integration, installation and
software support. Norand selects VARs based on their application knowledge,
systems and technical expertise, financial resources, support capabilities,
ability to provide complete systems to a specific market segment, reputation and
dedication to customer satisfaction. Norand sells through approximately 240
active VARs. No single VAR accounted for more than 5% of Norand's sales in 1996.
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International Sales Channels
International sales channels include a direct sales force with offices in
Australia, Canada, Denmark, Germany, Italy, Mexico, Netherlands, Spain, Sweden
and the United Kingdom, and VARs in Argentina, Australia, Finland, Greece, Hong
Kong, Japan, Spain, Venezuela and the Benelux countries. Norand is continuing to
invest in international markets by expanding sales channels, modifying products
to fit country requirements and providing local service and support. In 1996,
approximately 28% of Norand's revenues were attributable to international sales
(including export sales) compared with 31% of revenues attributable to such
sales in 1995. See Note 14 of Notes to Consolidated Financial Statements.
SERVICE AND SUPPORT
Norand emphasizes quality customer service and support with approximately
231 employees dedicated to these functions at Norand's thirteen service
facilities. Norand maintains an extensive field service organization, as well as
an internal support staff in Cedar Rapids, Iowa. Assistance is available to
Norand customers 24 hours a day, seven days a week.
Norand typically offers industry-standard 90 day to one year warranties and
offers several flexible service arrangements to meet customer needs. The
majority of Norand's service agreements are one-year renewable contracts. In
addition to technical support of installed systems, Norand's Systems Integration
and Support Services Group provides pre-installation site surveys, installation
services, user training, technical training, application software support and
host information system integration services under a variety of billing options.
Significant, on-going investment is directed toward improving customer
support capabilities and responsiveness. Norand has implemented an automated
call response center (i.e., help desk) that features direct and remote
diagnostic access capabilities.
QUARTERLY TREND IN OPERATING RESULTS
Historically, Norand has experienced a trend in its operating results in
which the fourth quarter contributes the highest total revenues and operating
income. In the fiscal years ended August 31, 1994, 1995 and 1996 the fourth
quarter represented approximately 32%, 27% and 29% of revenues, respectively. In
the fiscal year ended August 31, 1994, fourth quarter operating income amounted
to approximately 45% of operating income for the year. See Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Notes 2 and 15 of Notes to Consolidated Financial Statements regarding the
operating loss in the fourth quarter of 1995, and operating income in the fourth
quarter of 1996. Norand believes that the above trend of sales and earnings,
which shows the importance of the fourth quarter, results mainly from the
historical structure of Norand's sales programs combined with the timing of new
product introductions and resulting customer orders. Norand can provide no
assurance that this trend will improve in the future. Norand believes that
quarterly, period to period comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
Product and System Development
Norand believes that its future results depend, in part, on its ability to
develop new products and enhance the capabilities and features of its existing
products. Norand has spent $17.0 million, $19.5 million and $18.5 million in
fiscal years 1994, 1995 and 1996, respectively, on research and development.
Norand's current development efforts include projects related to advanced wired
and wireless network and communication systems, object-oriented software
libraries, modular terminal devices, and innovative peripheral devices. It is
not certain, however, that any particular development project will result in
products or product improvements that achieve commercial acceptance.
Norand continues to emphasize new product and system development as a key
element of its business strategy. Norand was one of the first companies to
develop and market the following systems and products: bar code scanning with
hand-held batch terminals (mid-1970s); two-way programmable hand-held computers
(late 1970s); route accounting systems (late 1970s); charged coupled device
("CCD") hand-held scanners
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(early 1980s); integrated hand-held RF systems (mid-1980s); rugged, portable,
AC/DC powered printers (late 1980s); rugged "pick and run" RF systems (late
1980s); pocket RF systems (early 1990s); pen-based portable systems (1994); and
full VGA screen, rugged portable systems (1995).
Norand emphasizes concurrent engineering practices in product development
by involving all aspects of the product development and manufacturing processes,
including engineering, manufacturing, suppliers and marketing.
MANUFACTURING AND SUPPLIERS
Norand's manufacturing operation is responsible for final assembly of
products, subassembly of certain components, system level quality assurance and
materials movement and product logistics. The production workforce is organized
into multi-skilled, product specific, self-directed work teams. Just-in-time
manufacturing methodologies are utilized throughout the operation to build
product to specific customer orders as received.
Norand's internal information systems track and plan the availability of
materials and manpower. In addition, Norand utilizes bar code and scanner
technology and Norand's own RF networks and terminals to stage and track
customer shipments. Norand also tracks all phases of the production process from
supplier defects to product defects at the customer site. This information helps
Norand systematically identify and eliminate such defects. In addition, Norand
is in the process of strengthening its internal information systems through the
implementation of the SAP business systems software package. The SAP system will
provide a worldwide, integrated set of business applications including customer
order entry, manufacturing and financial systems. Configuration of the SAP
system began in the first quarter of fiscal year 1996. During the fourth quarter
of 1996, the financial and procurement functions of the Company began processing
information and transactions in the new system. The Company expects to complete
its world-wide implementation of SAP in fiscal 1997.
Norand has developed relationships with high quality suppliers which enable
the Company to route many incoming components directly to stock without
inspection, thereby reducing cost and cycle time. Currently about 20 suppliers
provide approximately 45% of the dollar volume of components purchased. Single
source subassembly manufacturers are used for such components as printed circuit
boards and molded outer case parts. EMD Associates, Inc., Electronic Assembly
Corporation, and Celestica, Inc. are the Company's principal suppliers of
printed circuit boards and other electronic components. PSC, Inc. and Symbol
Technologies, Inc. ("Symbol") are the Company's principal bar code scanner
suppliers. Epson America, Inc. is a primary supplier to the Company of printer
mechanisms, liquid crystal displays, and PCMCIA products.
Symbol owns certain patents relating to integrated laser scanning terminals
and has licensed several companies, including Norand, to produce and sell
integrated laser scanning terminals covered by the licensed patents in a certain
field of use as defined in the license agreement. Norand's license agreement
with Symbol permits Symbol to terminate Norand's license upon a change of
control of Norand unless (1) Norand pays a transfer fee to Symbol equal to the
higher of 10% of that portion of the consideration received in the sale of
control of Norand that is attributable to technology covered by the license
agreement or $500,000 and (2) Norand and each entity having beneficial ownership
of more than 50% of Norand's voting securities or otherwise actually controlling
Norand, maintains its headquarters and base operations and organizations in
North America or Western Europe. For purposes of this license agreement, a
change of control occurs when an entity that was not a shareholder on the date
of the license agreement becomes the beneficial owner of 20% or more of Norand's
voting securities outstanding on the date of the change in control or otherwise
acquires control of Norand's operations. Unless earlier terminated, the
agreement continues until the last to expire of the licensed patents. Symbol may
terminate the agreement if Norand materially breaches the agreement or a change
of control of Norand occurs. The license agreement is non-transferable (except
in certain limited situations) and non-exclusive.
Certain of Norand's key suppliers are linked electronically with Norand's
materials resource planning system for immediate access to forecast information.
Norand believes that by forming long-term relationships with suppliers that
share Norand's commitment to quality, it has been able to increase product
quality and
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improve order response time and reduce inventory carrying costs. Norand does not
believe that the loss of any one supplier or subassembly manufacturer would have
a material long-term adverse effect on its business, although set-up costs and
delays would occur if Norand changed any single source supplier. Norand has not
experienced any substantial delays in product shipments due to delays in receipt
of components.
BACKLOG
Norand generally operates without a significant backlog of firm orders and
it does not consider backlog to be a significant measure of future sales.
COMPETITION
The market for Norand's products is highly competitive and rapidly
changing. Some firms manufacture and market hand-held systems for route
accounting applications, including Telxon Corporation and Fujitsu Systems of
America. In addition, a number of firms manufacture and market radio-linked data
communication products, including LXE Inc., Teklogix Corporation, Symbol
Technologies, Inc., Telxon Corporation and Intermec (a division of Western
Atlas). Some of these firms have greater financial, marketing and technical
resources than Norand. In addition, larger corporations could enter these
markets. Norand competes on the basis of its open modular systems approach,
network and communications expertise, applications software, level of sales and
support services, and product functionality, performance, ruggedness and overall
quality.
INTELLECTUAL PROPERTY
Norand regards some of its product offerings as proprietary and relies on a
combination of patent, trade secret, copyright and trademark law to establish
and protect its proprietary rights. While some proprietary rights are protected
in various foreign countries, primary emphasis has been placed on protection in
the United States. The laws of some foreign countries do not protect Norand's
proprietary rights to the same extent as do the laws of the United States.
As of August 31, 1996, Norand has in force 124 U.S. patents and 22 foreign
patents. The expiration dates of the U.S. patents range from June 1998 to
September 2014. The expiration dates of the foreign patents range from April
2000 to February 2013. Norand is of the opinion that, in view of the rapid pace
of technological change in the industry, the combination of trade secrets and
the technical experience and innovative skills of its engineers may be as
important to its business as the legal protection of its patents and other
intellectual property rights. Norand believes that its products and trademarks
do not infringe on the rights of third parties. There can be no assurance,
however, that third parties will not assert infringement claims in the future.
Norand holds certain patents relating to CCD technology. CCD technology is
an important alternative to laser scanning technology in some bar code reading
applications. Norand does not presently manufacture CCD or laser bar code
scanning devices, but purchases such devices for resale from unrelated third
parties. Sales of CCD bar code scanning devices have not been material to
Norand's operations.
Norand continues to invest in its portfolio of intellectual properties.
During fiscal years 1996, 1995 and 1994 expenditures capitalized for software,
patents and intellectual properties were approximately $2.9 million, $5.4
million and $2.8 million, respectively. As part of its activities to enforce its
intellectual property rights, Norand has licensed third parties in exchange for
license payments and is in discussions with others regarding similar licenses
under Norand's intellectual property rights.
EMC Corporation ("EMC"), a manufacturer of RAID removable disk storage
systems, brought suit in January 1995 in the United States District Court for
the District of Massachusetts, seeking declaratory judgment that EMC did not
infringe upon Norand's patents on removable hard-drives. The District Court in
August 1995 declined to hear the case on jurisdictional grounds, and in
September 1995 EMC appealed the judgment to the United States Court of Appeals
for the Federal Circuit (CAFC). In July, 1996, the CAFC affirmed the District
Court decision. EMC has filed a Writ of Certiorari with United States Supreme
Court seeking review of the CAFC decision.
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EMPLOYEES
As of October 31, 1996, Norand had 931 full-time employees. Of these
employees, 230 are engaged in sales and marketing, 231 in service and customer
support, 59 in applications software development, 122 in engineering, 169 in
manufacturing and 120 in administrative functions. Norand, on occasion, employs
part-time personnel for production, technical and clerical positions. Norand
believes that its relationship with its employees is good.
GOVERNMENTAL REGULATION
Radio emissions are the subject of governmental regulation in all countries
in which Norand currently conducts business. In North America, both the Canadian
and the United States governments publish relevant regulations, and changes to
these regulations are made only after public discussion. In some countries
regulatory changes can be introduced with little or no grace period for
implementing the specified changes. Furthermore, there is little consistency
among the regulations of various countries outside North America, and future
regulatory changes in North America are possible. These conditions introduce
uncertainty into the product planning process and could have an adverse effect
on Norand.
The European Community ("EC") has passed a directive requiring members of
the EC to adopt laws relating to electro-magnetic compatibility and emissions
standards. EC directives do not instantly become law in member countries, rather
member countries introduce new laws, or amend existing laws in order to be in
compliance with directive objectives. These standards will apply to Norand
products sold in EC member countries as those countries adopt the EC standards
into law. Currently, Norand believes that its products are in material
compliance with the regulations in force in each of the EC member countries.
ITEM 2. PROPERTIES
Norand's principal administrative, marketing, engineering and manufacturing
facilities consist of approximately 232,000 square feet in Cedar Rapids, Iowa.
Norand owns its corporate office (approximately 88,000 square feet) and leases
its manufacturing facility (96,000 square feet), its new product development
center (32,000 square feet) and additional office space (16,000 square feet).
These lease agreements expire in 1999, 2001 and 1998, respectively. The annual
base rent for the Cedar Rapids area leased facilities is approximately $1.1
million.
Norand leases sales offices in 13 U.S. cities. These offices are located in
the metropolitan areas of Atlanta, Baltimore, Charlotte, Chicago, Dallas,
Denver, Detroit, Los Angeles, Minneapolis, Pittsburgh, San Francisco, Seattle,
and Tucson. Norand operates ten wholly-owned subsidiaries internationally,
located in Sydney, Australia; Toronto, Ontario, Canada; Reading, England; Milan,
Italy; Dusseldorf, Germany; Madrid, Spain; Copenhagen, Denmark; the Netherlands;
Stockholm, Sweden; and Mexico City, Mexico. Each of the subsidiaries occupies
leased office and service maintenance space. Norand's five service and repair
centers are located in Cedar Rapids, Iowa; Charlotte, North Carolina; Dallas,
Texas; Los Angeles, California; and Toronto, Ontario, Canada. Norand also leases
engineering and development offices in Boulder, Colorado and San Jose,
California. Annual rental expense for such offices and service centers is
approximately $1.8 million.
Norand believes that its facilities are adequate for its current needs and
that additional space would be available if required.
ITEM 3. LEGAL PROCEEDINGS
In October 1995, two class action complaints were filed against the Company
and certain of its officers in United States District Court in Cedar Rapids,
Iowa, seeking unspecified damages on behalf of a purported class of purchasers
of Norand stock on the ground that the defendants violated the federal
securities laws by allegedly making materially false and misleading statements
concerning the Company's results of operations and future prospects during the
period from March 20, 1995 until September 25, 1995. On November 24,
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1995, a third lawsuit was filed in the same court raising substantially the same
claims on behalf of a broader purported class of purchasers of Norand stock.
All three lawsuits were consolidated under the caption In re Norand
Corporation Securities Litigation (Master File No. C 95-323). On December 23,
1995, a single amended and consolidated complaint was filed in the consolidated
action, superseding all previous pleadings. The complaint was filed on behalf of
a purported class consisting of purchasers of Norand stock from September 26,
1994 through November 17, 1995, and named as defendants the Company, five of its
present or former senior officers, and Arthur Andersen LLP, the Company's
independent public accountant. The consolidated complaint alleged, among other
things, that the Norand defendants materially overstated the Company's revenues
and earnings by improperly recording sales in its Italian subsidiary and misled
the market by failing to disclose alleged problems with certain of its products
that affected its revenues in the fourth quarter of fiscal 1995.
On August 28, 1996, the Company announced that it had signed an agreement
to settle the consolidated complaint and secure releases for all of the
defendants with the exception of Arthur Andersen. The Company believes its
officers and directors acted properly regarding this matter and denies any
wrongdoing. Nevertheless, the Company feels it is in the best interest of the
Company and its shareholders to settle the matter and devote management time and
energy to running the business.
The settlement, which calls for the payment of $4.5 million in cash and
$4.5 million worth of Norand stock, is subject to approval by the District
Court, following notice to the class and a hearing on the fairness of the
settlement. That hearing is scheduled for December 19, 1996. The cash portion of
the settlement is covered by insurance. The Company has the option to pay $4.5
million in cash instead of issuing the stock.
The settlement resulted in a fourth quarter charge of $4.8 million
including additional legal costs related to the portion of the settlement not
covered by insurance. The Company had previously accrued $0.3 million in the
first quarter for related legal costs.
The Company is also subject to certain legal proceedings and claims which
have arisen in the ordinary course of its business and have not been finally
adjudicated. In management's opinion, the ultimate resolution of these matters
will not be material to the Company's consolidated financial position or results
of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Norand's security holders
during the fourth quarter of 1996.
10
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Norand common stock is traded on the Nasdaq Stock Market National Market
under the symbol NRND. The following table sets forth the reported high and low
sale prices per share of the common stock for each quarter during each of the
two most recent fiscal years.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter................................. $43.25 $13.25 $40.75 $32.75
Second Quarter................................ 19.00 11.13 41.00 33.00
Third Quarter................................. 21.00 15.50 42.75 27.00
Fourth Quarter................................ 23.00 15.75 48.25 32.25
</TABLE>
As of November 8, 1996, there were approximately 8,000 shareholders of the
Company. The Company has never declared or paid cash dividends on the common
stock.
11
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data concerning Norand have been derived from the
consolidated financial statements of Norand and should be read in conjunction
with the consolidated financial statements, including the notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, each of which is included in this Form 10-K.
NORAND CORPORATION
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales revenue................. $193,249 $179,266 $153,653 $129,239 $ 91,205 $ 81,238 $72,032
Customer service revenue.............. 42,251 38,648 33,816 27,966 23,434 20,256 18,029
-------- -------- -------- -------- ------- ------- -------
Total revenues.................... 235,500 217,914 187,469 157,205 114,639 101,494 90,061
Cost of products and services(2)........ 141,744 127,816 96,139 83,342 57,380 50,310 45,161
-------- -------- -------- -------- ------- ------- -------
Gross profit...................... 93,756 90,098 91,330 73,863 57,259 51,184 44,900
Operating Expenses:
Product development and engineering
expenses............................ 22,898 22,408 20,554 16,242 12,221 11,955 10,018
Selling expenses...................... 58,347 55,160 44,503 32,811 27,035 22,994 19,767
General and administrative expenses... 17,006 15,006 12,868 11,606 9,678 8,272 6,960
Restructuring charge.................. 4,392 -- -- -- -- -- --
Amortization of intangible assets(3).... -- -- -- -- -- 19,148 5,925
Other income............................ -- -- -- -- -- (1,083) --
-------- -------- -------- -------- ------- ------- -------
102,643 92,574 77,925 60,659 48,934 61,286 42,670
-------- -------- -------- -------- ------- ------- -------
Income from operations.................. (8,887) (2,476) 13,405 13,204 8,325 (10,102) 2,230
Interest and other expenses............. 6,256 3,482 1,437 3,666 4,846 5,463 5,233
Litigation settlement................... 5,100 -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------
Income (loss) before income taxes....... (20,243) (5,958) 11,968 9,538 3,479 (15,565) (3,003)
Provision (benefit) for income taxes.... (6,073) (2,252) 5,594 1,207 81 19 73
-------- -------- -------- -------- ------- ------- -------
Net income (loss)....................... $(14,170) $ (3,706) $ 6,374 $ 8,331 $ 3,398 $(15,584) $(3,076)
======== ======== ======== ======== ======= ======= =======
Net income (loss) per common share...... $(1.87) $(0.50) $0.86 $1.50 $0.51 $(25.67) $(6.95)
======== ======== ======== ======== ======= ======= =======
Weighted average number of common and
common equivalent shares
outstanding(4)........................ 7,573 7,458 7,445 5,652 3,436 669 666
======== ======== ======== ======== ======= ======= =======
Balance Sheet Data:
Working capital......................... $ (5,787) $ 14,777 $ 29,574 $ 28,283 $ 4,824 $ 9,234 $10,213
Total assets............................ 172,065 160,588 133,431 103,434 76,648 67,799 79,577
Long-term debt, net of current
portion............................... -- -- -- 2,000 24,046 28,720 32,458
Series A preferred stock................ -- -- -- -- 15,534 13,891 12,295
Series B preferred stock................ -- -- -- -- 10,135 10,135 10,135
Stockholders' equity (deficit).......... 42,734 55,271 56,977 49,768 (23,858) (25,713) (8,539)
<CAPTION>
YEAR ENDED
AUGUST 31
----------
PRO FORMA
1989(1)(2)
----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales revenue................. $ 68,278
Customer service revenue.............. 15,837
-------
Total revenues.................... 84,115
Cost of products and services(2)........ 46,267
-------
Gross profit...................... 37,848
Operating Expenses:
Product development and engineering
expenses............................ 9,608
Selling expenses...................... 16,785
General and administrative expenses... 6,450
Restructuring charge.................. --
Amortization of intangible assets(3).... 6,125
Other income............................ 1,428
-------
40,396
-------
Income from operations.................. (2,548)
Interest and other expenses............. 5,400
Litigation settlement................... --
-------
Income (loss) before income taxes....... (7,948)
Provision (benefit) for income taxes.... 62
-------
Net income (loss)....................... $ (8,010)
=======
Net income (loss) per common share...... $(14.79)
=======
Weighted average number of common and
common equivalent shares
outstanding(4)........................ 628
=======
Balance Sheet Data:
Working capital......................... $ 9,348
Total assets............................ 75,027
Long-term debt, net of current
portion............................... 36,199
Series A preferred stock................ 12,020
Series B preferred stock................ 10,135
Stockholders' equity (deficit).......... (3,912)
</TABLE>
- -------------------------
(1) Information for the year ended August 31, 1989 is a pro forma presentation
of two months of predecessor operation and ten months of operations as
Norand.
(2) Cost of products and services for 1989 includes acquisition-related,
non-recurring charges of $3.3 million representing the amount of fair market
value over historical cost of beginning inventories.
(3) In fiscal 1991, Norand revised its estimates of the remaining useful lives
of certain intangible assets capitalized at the time of the acquisitions.
These revisions had the effect of increasing amortization of intangible
assets by $12.5 million for the fiscal year ended August 31, 1991.
(4) Net income (loss) per share is calculated after deducting Series A preferred
stock dividends and accretion from reported net income (loss) for fiscal
years through 1993. For the years 1989 through 1991, primary earnings per
share have been presented. For fiscal years 1992 through 1996, fully diluted
earnings per share have been presented. For fiscal years 1992 and 1993,
primary earnings per share were $1.56 and $1.81, respectively. For the loss
periods, common stock equivalents that are anti-dilutive are not included in
the computation of earnings per share. See Note 3 to Consolidated Financial
Statements for a discussion of the calculation of net income per share.
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT
Except for the historical information contained herein, certain of the
matters discussed in this annual report are "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995, which involve
risks and uncertainties. Potential risks and uncertainties include, without
limitation, continued pressures in the marketplace, the Company's ability to
realize the benefits of the implemented restructuring of the Company, the future
need for restructuring, the Company's ability to achieve increased revenues from
new products and achieve lower operating expenses as a percentage of revenues,
the Company's ability to obtain debt financing and maintain liquidity, and other
factors that may effect future results as described below.
Product shipments made during any particular quarter generally represent
orders received either during that quarter or shortly before the beginning of
that quarter. Shipments for orders received in a fiscal quarter are generally
from products manufactured in that quarter. It is the Company's objective to
maintain sufficient levels of inventories to facilitate meeting delivery
requirements of its customers. However, there can be no assurance that during
any given quarter, the Company has or can procure the appropriate mix of raw
materials in order to accommodate any given order. The Company's financial
performance in any quarter is dependent to a significant degree upon obtaining
orders in that quarter which can be manufactured and delivered to its customers
near the end of that quarter. As such, financial performance for any given
quarter cannot be known or fully assessed until near the end of that quarter.
A substantial portion of the Company's total revenues is from customers
located outside of the United States. Foreign sales are subject to the normal
risk of foreign operations such as global and regional economic conditions,
trade protection measures, regulatory acceptance of the Company's products,
longer accounts receivable collection patterns and other considerations peculiar
to the conduct of international business. Additionally, the majority of the
Company's foreign sales are billed in foreign currencies which are subject to
fluctuations. The Company is subject to similar risks in its procurement of
certain of its materials and components from foreign sources.
Traditionally, the selling price of the Company's products decreases over
the life of the product. The Company endeavors to reduce manufacturing costs of
existing products and to introduce new products, functions and other
price/performance-enhancing features in order to mitigate the effect of such
decreases. To the extent that such cost reductions, product enhancements and new
product introductions do not occur in a timely manner or do not achieve market
acceptance, the Company's operating results could be materially, adversely
affected.
The business in which the Company is engaged is highly competitive and
influenced by advances in technology, product improvements and new product
introduction, and price competition. Failure to keep pace with product and
technological advances could adversely affect the Company's competitive position
and prospects for growth.
There can be no assurance that the Company's research and development
activities will lead to the successful introduction of new or improved products
or that the Company will not encounter delays or problems in connection
therewith. The cost of completing new technologies to satisfy customer design,
quality and delivery expectations may exceed original estimates and could
adversely effect operating profits during any financial period. There can be no
assurance that newly designed technologies and products will ever result in
volume production and shipments. In addition, products under development are
frequently announced before introduction and such announcements may cause
customers to delay purchases of existing products in anticipation of new or
improved versions of those products.
The Company seeks to protect its proprietary information and technology
through reliance on contractual confidentiality provisions and the application
of patent, trademark and copyright laws. There can be no assurance that such
applications will result in the issuance of patents, trademarks or copyrights or
that third parties will not seek to challenge, invalidate or circumvent such
applications or resulting patents, trademarks
13
<PAGE> 14
or copyrights. Moreover, competitors may independently develop equivalent or
superior, non-infringing technologies which could adversely effect the Company's
ability to market it's products and deliver revenue growth.
Many of the Company's products incorporate technologies licensed from third
parties. There can be no assurance that the Company will be able to license
needed technologies in the future. Additionally, the Company believes that its
products, processes and trademarks do not infringe on the rights of third
parties, however, there can be no assurance that third parties will not assert
claims of infringement of intellectual property rights against the Company and
that such claims will not lead to litigation and/or require the Company to
significantly modify or even discontinue sales of certain of its products.
The Company has in the past, and may in the future, encounter shortages of
supplies and delays in deliveries of necessary components from both domestic and
foreign suppliers. While past shortages and delays have not had a material
adverse effect on the Company, shortages and delays could have such effect in
the future. Certain components, subassemblies and products are sourced from a
single supplier or a limited number of suppliers. The loss of any such supplier
may cause the Company to incur additional set-up costs and delays in
manufacturing and delivery of products.
Certain of the Company's products operate through the transmission of radio
signals. These products are subject the regulation by the Federal Communications
Commission of the United States and corresponding authorities in other
countries. Currently, operation of such products in specified frequency bands
does not require licensing by such regulatory authorities. Regulatory changes
restricting the use of such bands or allocating frequencies could have a
materially adverse effect on the Company's business and its results of
operations.
The Company procures certain components and subassemblies subject to long
lead times and extended sales forecasts that may be affected by rapid
technological obsolescence. The effect of technological obsolescence has
resulted in previous material inventory writedowns and may result in future
writedowns which could adversely effect results of operations.
It is the Company's policy to depreciate specialized manufacturing
equipment over its remaining useful life using the units of productions method
and to evaluate the remaining life and recoverability of such equipment based on
unit sales projections of underlying products. Given the rapid changes in
technology, there can be no assurance that the Company's estimate that it will
recover the carrying amount of this equipment from future operations will not
change in the near term.
The Company has recorded deferred tax assets totaling $17.8 million at
August 31, 1996, which include $7.6 million of domestic net operating loss (NOL)
carryforwards. Realization of the benefit of the NOL carryforwards is dependent
on generating sufficient taxable income prior to the expiration of the loss
carryforwards. Although realization is not assured, management believes it is
more likely than not that all of the deferred assets will be realized. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
As a result of losses in fiscal 1995, the Company was not in compliance
with certain covenants under its credit facility. Additionally, in November
1996, as a result of noncompliance with certain covenants due to losses recorded
in fiscal 1996, the Company and its lenders amended its credit facility (see
Note 7 to Consolidated Financial Statements). Although management believes that
the Company will comply with the covenants under the amended facility, there can
be no assurance that the Company will comply with any or all of the covenants
under the amended credit facility in future periods. Future noncompliance with
covenants under the amended credit facility could adversely impact the Company's
ability to secure adequate borrowings at a reasonable cost to fund future
operations and working capital requirements.
As discussed in Note 2 to Consolidated Financial Statements, the Company
recorded charges in its 1995 and 1994 financial statements related to
irregularities discovered at its Italian subsidiary. Although management
believes that the aggregate charges relating to the irregularities will not
exceed the amounts already recorded, there can be no assurance that additional
third party claims against the Italian subsidiary will not be
14
<PAGE> 15
discovered in future periods which will result in further losses which could
have an adverse financial impact on the Company.
The Company has in the past and may in the future acquire businesses as a
way of expanding its product offerings and acquiring new technology. Failure of
the Company to identify future acquisition opportunities and/or to integrate
effectively businesses that it may acquire could have a material adverse effect
on the Company's growth.
The Company's future depends in large part on the continued recruitment and
retention of key technical, marketing and management personnel, particularly
those highly skilled design, process and test engineers involved in the
manufacture of existing products and the development of new products and
processes. The competition for such personnel is intense, and the loss of key
employees could have a materially adverse effect on the Company's business,
financial condition and results of operations.
In addition to factors described above, the Company's future financial
results are subject to possible adverse effects of certain pending litigation as
discussed in Note 13 of the Consolidated Financial Statements.
OVERALL SUMMARY
The Company had revenues of $235.5 million in 1996 compared to revenues of
$217.9 million in 1995 and $187.5 million in 1994. Gross profit increased to
$93.8 million in 1996 compared to $90.1 million in 1995 and $91.3 million in
1994. The Company recorded an operating loss of $8.9 million in 1996 compared to
an operating loss of $2.5 million in 1995 and operating income of $13.4 million
in 1994. The Company recorded a net loss of $14.2 million in 1996 compared to a
net loss of $3.7 million in 1995 and net income of $6.4 million in 1994. The net
loss in 1996 resulted primarily from the following factors:
Decline in Gross Profit Percentages -- Gross profit percentages were 39.8%
in 1996 compared to 41.3% in 1995 and 48.7% in 1994. The decrease in margin
percentages in 1996 resulted from the Company's continued transition to its new
products which carry lower margins than the products they replaced, combined
with $2.4 million of inventory writedowns and $1.8 million of increased costs to
enhance new and existing products.
Restructuring Charge -- During fiscal 1996, the Company implemented a
company-wide restructuring of its operations designed to improve its financial
performance in the short and long-term. The restructuring resulted in a net
pretax charge of $4.4 million. The charge has been partially offset by reduced
core operating expense rates in the second half of fiscal 1996.
Litigation Settlement -- During the fourth quarter of 1996, the Company
signed a preliminary agreement to settle litigation brought against the Company
and a number of present and former officers and directors. The settlement
resulted in a $4.8 million pretax charge in the fourth quarter and a total $5.1
million pretax charge for the year.
Other Operating Charges -- During fiscal 1996, the Company recorded
provisions for bad debt losses of $3.8 million, additional professional fees of
$0.7 million related to the Italian irregularities discovered during the fiscal
1995 audit and $0.7 million for post shipment costs relative to supporting
customer installations of Norand products and systems.
Increased Interest and Other Expenses -- Interest and other expenses were
$6.3 million in 1996 compared to $3.5 million in 1995 as a result of higher
average debt levels and higher interest rates.
15
<PAGE> 16
RESULTS OF OPERATIONS
The following table sets forth for the years indicated (i) certain revenue
and expense items expressed as a percentage of revenues and (ii) the percentage
increase or decrease of such items as compared to the corresponding prior year.
<TABLE>
<CAPTION>
YEAR TO YEAR CHANGES
PERCENTAGE OF REVENUE ----------------------
--------------------------- 1996 VS. 1995 VS.
YEAR ENDED AUGUST 31 1996 1995 1994 1995 1994
- ---------------------------------------------- ----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales revenue....................... 82.1% 82.3% 82.0% 7.8% 16.7%
Customer service revenue.................... 17.9% 17.7% 18.0% 9.3% 14.3%
----- ----- ----- ----- -----
Total revenues........................... 100.0% 100.0% 100.0% 8.1% 16.2%
Cost of products and services................. 60.2% 58.7% 51.3% 10.9% 32.9%
----- ----- ----- ----- -----
Gross profit............................. 39.8% 41.3% 48.7% 4.1% (1.3)%
Operating expenses:
Product development and engineering
expenses................................. 9.7% 10.3% 10.9% 2.2% 9.0%
Selling expenses............................ 24.8% 25.3% 23.7% 5.8% 23.9%
General and administrative expenses......... 7.2% 6.8% 6.9% 13.3% 16.6%
Restructuring charge........................ 1.9% -- -- -- --
----- ----- ----- ----- -----
Total operating expenses................. 43.6% 42.4% 41.5% 10.9% 18.8%
Income (loss) from operations............... (3.8)% (1.1)% 7.2% (258.8)% (118.5)%
Interest and other expenses................... 2.7% 1.6% 0.8% 79.7% 142.3%
Litigation settlement......................... 2.2% -- -- -- --
----- ----- ----- ----- -----
Income (loss) before income taxes........... (8.6)% (2.7)% 6.4% (239.7)% (149.8)%
Provision (benefit) for income taxes.......... 2.6% (1.0)% 3.0% 169.7% (140.3)%
----- ----- ----- ----- -----
Net income (loss)............................. (6.0)% (1.7)% 3.4% (282.2)% (158.1)%
===== ===== ===== ===== =====
</TABLE>
REVENUES
Revenues increased $17.6 million (8.1%) from 1995 to 1996 and $30.4 million
(16.2%) from 1994 to 1995. Product revenues increased $14.0 million (7.8%) from
1995 to 1996 and $25.6 million (16.7%) from 1994 to 1995. The 1995 and 1996
increases in product revenues are primarily due to continued growth in
established domestic and international markets supported by increased shipments
of the Company's pen-based and wireless families of products. There were no
material price increases in any year.
Customer service revenue increased $3.6 million (9.3%) from 1995 to 1996
compared to an increase of $4.8 million (14.3%) from 1994 to 1995. Customer
service revenue was 17.9%, 17.7% and 18.0% of total revenues for the fiscal
years ended 1996, 1995 and 1994, respectively. Customer service revenue is
relatively stable as a percent of total revenues and has increased each year due
to continued growth in the Company's installed domestic and international
customer base.
International revenue, including exports, as a percent of total revenues,
was 27.9% in 1996, 30.9% in 1995 and 22.1% in 1994. International revenue
decreased 2.5% from 1995 to 1996, and increased 62.3% 1994 to 1995,
respectively. The decrease in 1996 is due to decreased revenues in Canada offset
by increased revenues in Europe, Mexico and Australia.
GROSS PROFIT
Gross profit as a percent of total revenues was 39.8% in 1996, 41.3% in
1995 and 48.7% in 1994. The decreases in gross profits in 1996 and 1995 are
primarily due to lower margins in all markets due to competitive pricing
pressures, combined with a continued shift in product mix to the new PEN*KEY
family
16
<PAGE> 17
of products which carry a lower margin than the products they replace.
Additionally, margins in 1996 were adversely effected by inventory writedowns of
$2.4 million, and $1.8 million of increased costs to enhance new and existing
products. Margins in 1995 were affected by $3.8 million of charges related to
the Company's Italian subsidiary, and additional provisions for sales returns
and inventory obsolescence.
OPERATING EXPENSES
Product Development and Engineering. Norand increased its expenditures on
product development and engineering by $0.5 million (2.2%) in 1996 and $1.9
million (9.0%) in 1995. Product development and engineering expenses were 9.7%,
10.3% and 10.9% of total revenues for fiscal years 1996, 1995 and 1994,
respectively. The increases in expenditures are due primarily to continued
development/enhancement of the PEN*KEY family of products as well as the open
systems wired and wireless local area networks. The Company intends to continue
making a significant investment in product development and engineering in the
future.
Selling. Selling expenses increased $3.2 million (5.8%) in 1996 and $10.7
million (23.9%) in 1995. The increase in 1996 is primarily due to increased
domestic sales volume and increased post shipment costs relative to supporting
customer installations of Norand's products and systems, offset by a $1.2
million decrease in provisions for bad debt losses. Provisions for bad debt
losses in 1996 amounted to $3.8 million compared to $5.0 million in 1995. The
decrease results primarily from a $3.5 million decrease in bad debt provisions
recorded at the Company's Italian subsidiary offset by a $2.3 million increase
in domestic bad debt provisions. The increase in 1995 selling expenses is
primarily due to increased domestic and international sales volume, $3.5 million
of increased provisions for bad debt losses recorded at the Company's Italian
subsidiary, of which $3.0 million related to irregularities, and $1.0 million of
increased domestic provisions for bad debt losses. Selling expenses as a percent
of revenues were 24.8%, 25.3% and 23.7% in 1996, 1995 and 1994, respectively.
General and Administrative. General and administrative expenses increased
$2.0 million (13.3%) in 1996 and $2.1 million (16.6%) in 1995. The 1996 increase
is primarily due to $0.7 million of additional professional fees related to the
completion of the Company's Italian investigation, $1.2 million of increased
costs relative to the development, amortization, maintenance and defense of the
Company's intellectual properties, and $1.6 million of increased depreciation,
personnel related and other expenses, offset by the 1995 costs recorded for
irregularities in Italy. The 1995 increase is primarily due to $1.5 million of
charges for severance costs, third party claims, and investigation costs
applicable to the Company's Italian subsidiary. General and administrative
expenses as a percent of revenues were 7.2%, 6.8% and 6.9% in 1996, 1995, and
1994, respectively.
RESTRUCTURING
During the second quarter of 1996, the Company initiated a company-wide
restructuring of its operations and implemented actions designed to improve its
financial performance in the short and long term. These actions were targeted at
improving gross margins, significantly reducing operating expenses, enhancing
the capability of launching and supporting new products and systems and
improving financial controls. The actions that the Company undertook resulted in
a second quarter restructuring charge of $5.2 million ($3.6 million after-tax).
The restructuring charge was reduced by $0.8 million in the fourth quarter as a
result of favorable experience compared to previous cost estimates. The
restructuring charge included $3.7 million for severance and other costs related
to reductions in the Company's domestic and international workforce and $0.7
million for lease exit costs associated with the closing or consolidating of
certain facilities. As of August 31, 1996, approximately $1.6 million of the
charge has not yet been expended. The Company expects to expend the remaining
balance, comprised primarily of amounts due in installments under severance and
lease agreements, in fiscal 1997.
While this charge reduced net income, the Company believes that annual cost
savings resulting from the restructuring will be in excess of these charges. The
Company believes that the combination of increasing revenues along with the
potential savings of the restructuring initiatives will continue to result in
improved
17
<PAGE> 18
financial results. However, no assurances can be given as to the actual extent
of any savings or improvements that might be realized or that additional actions
and additional charges against earnings might not occur in the future.
The restructuring of the Company's operations will aid its transition to an
open systems mobile computing company delivering local wireless and remote
business solutions. The transition has required changes in the organization's
size, structure and skill sets required to profitably operate in this new
environment. The Company will continue to make critical sales channel and R&D
investments to support its vertical market solutions strategy. The Company's
actions have resulted in the achievement of the following objectives:
- Reduction of core operating expense run rates
- Increased efficiencies and coordination of development activities
- Strengthened product and systems integration support through
consolidation of resources
- Strengthened procurement and logistics functions
- Completion of the consolidation of the Company's world-wide sales and
marketing organization
- Improved financial controls.
The actions were taken to improve both the short and long term performance
of the business by creating a more effective marketing, sales and support
organization, with ongoing investment in new products and more efficient
manufacturing, procurement and logistics capabilities.
INTEREST AND OTHER EXPENSES
Interest and other expenses were $6.3 million in 1996, $3.5 million in
1995, and $1.4 million in 1994. The increases are due primarily to increased
borrowings for financing the continued growth of the Company's foreign and
domestic operations, borrowings resulting from the 1994 and 1995 losses in Italy
and borrowings to finance the 1996 company-wide restructuring, combined with
higher average interest rates.
PROVISION FOR INCOME TAXES
The Company recorded income tax benefits of $6.1 million in 1996 and $2.3
million in 1995 and an income tax provision of $5.6 million in 1994. The
effective tax rate was 30.0% in 1996, 37.8% in 1995 and 46.7% in 1994. The
income tax benefit for 1996 included a $2.3 million refund resulting from the
Company's write-off, for tax purposes, of its net investment in its Italian
subsidiary offset by a $2.8 million increase in the deferred tax asset valuation
allowance and $1.2 million of additional reserves for taxes related to open
years subject to examination. The income tax benefit for 1995 included a $1.9
million reduction of the deferred tax asset valuation allowance partially offset
by a $1.3 million provision for additional reserves (primarily international)
related to 1995. The Company has recorded a valuation allowance for certain
foreign net operating losses and research and development tax credit
carryforwards as it is uncertain that the Company will realize such benefits.
NET INCOME
The net loss of $14.2 million for 1996 was primarily due to restructuring,
litigation, other operating charges and increased interest expenses offset by a
net deferred tax benefit. The net loss of $3.7 million for 1995 was due
primarily to fourth quarter domestic operating shortfalls, losses associated
with the Company's Italian subsidiary and increased interest and other expenses,
offset by a net deferred tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by (used in) operations for 1996 was $(0.6) million compared
to $(2.9) million and $1.6 million in 1995 and 1994, respectively. The 1996
improvement as compared to 1995 is due to a decrease in net income combined with
an increase in accounts receivable of $8.2 million offset by a decrease in
18
<PAGE> 19
inventories of $3.3 million and an increase in other current liabilities of
$13.8 million. The 1995 decline compared to 1994 is due primarily to a decrease
in net income combined with an increase in accounts receivable of $6.2 million
and an increase in inventories of $6.6 million. The 1996 and 1995 increases in
receivables are due to higher third and fourth quarter gross sales compared to
the same periods of 1995 and 1994, respectively. The 1996 decrease in
inventories compared to 1995 is due to certain orders not being shipped as
expected at the end of 1995. The average number of days sales outstanding in
receivables was approximately 91 days in 1996, 104 days in 1995 and 120 days in
1994. The average inventory turnover rate was 3.9 in 1996, 3.5 in 1995 and 3.2
in 1994.
At August 31, 1995, the Company had $39.5 million of borrowings outstanding
under a credit facility (the "Agreement") with a domestic bank which allowed for
$60.0 million in maximum borrowings. In October 1995, as a result of
non-compliance with the Agreement, the Company amended and recollateralized the
Agreement resulting in an increase in the effective interest rate by 1.0 percent
on LIBOR borrowings and 0.5 percent on prime rate borrowings.
As a result of the losses for the year ended August 31, 1995 and losses for
the quarter ended December 2, 1995, the Company was not in compliance with
certain covenants under the amended Agreement. Borrowings under the amended
Agreement to fund operations and capital additions had increased to $57.4
million in early December, 1995. Due to covenant violations, in December 1995,
available borrowings under the amended Agreement were frozen at $57.4 million.
On January 25, 1996, the Company amended and restated the Agreement (the
"Restated Agreement") with its lending group wherein the lending group agreed to
waive any defaults under or violations of the Agreement occurring on or before
January 25, 1996. The Restated Agreement provided for an amortizing term loan
beginning at $52.0 million and amortizing by $1.0 million per month beginning
September 15, 1996 to $48.0 million on December 15, 1996, and up to $11.5
million in borrowing base revolving loans. The Restated Agreement was limited to
$63.5 million in aggregate borrowings. Borrowings under the Restated Agreement
were to mature on December 31, 1996. The Company's obligations under the
Restated Agreement were secured by substantially all of the assets of the
Company. The effective interest rate, effective January 25, 1996, under the
Restated Agreement was the agent's alternate base rate (ABR) plus 1.75% for all
borrowings up to $57.4 million and ABR plus 2.75% for borrowings above $57.4
million. The Restated Agreement contained financial covenants, measured at
varying dates, including covenants relating to tangible net worth, capital
additions and cash flows. The Company paid a commitment fee at closing amounting
to 0.5% of the total facility.
At August 31, 1996, the Company had $52.0 million of borrowings outstanding
under the Restated Agreement. In November 1996, as a result of noncompliance
with certain covenants under the Restated Agreement due to losses incurred for
the year ended August 31, 1996, the Company and its lenders amended the Restated
Agreement (the "Amended and Restated Agreement") wherein the lending group has
agreed to waive any defaults under or violations of the Restated Agreement
occurring on or before August 31, 1996. The Amended and Restated Agreement
provides for maximum borrowings of $60.5 million. Maximum allowable borrowings
decline to $59.5 million on December 16, 1996 and then decline periodically over
the period to $48.25 million on September 15, 1997. Obligations under the
Amended and Restated Agreement will mature on September 30, 1997. Obligations
under the Amended and Restated Agreement will continue to be secured by
substantially all of the assets of the Company. No foreign currency borrowings
are permitted under the Amended and Restated Agreement. The effective interest
rate increases periodically from September 15, 1996 to ABR plus 4% on December
31, 1996 for all borrowings. The Amended and Restated Agreement will continue to
contain financial covenants relating to tangible net worth, capital additions,
earnings and cash flows.
In addition to a fee amounting to $0.3 million which was paid on September
15, 1996 to maintain the aggregate borrowing capacity under the Restated
Agreement, the Company will be required to pay additional fees to maintain
aggregate borrowings under the Amended and Restated Agreement amounting to 0.1%
of the total facility due at closing, 0.1% of the total facility due monthly
from January 31, 1997 to April 30, 1997, and 0.25% of the total facility due
June 30, 1997.
19
<PAGE> 20
Concurrently with entering into the Amended and Restated Agreement, the
Company issued to its lending group Series A Warrants exercisable for an
aggregate of 250,000 shares of the Company's common stock (the "Series A
Warrants") and Series B Warrants exercisable for an aggregate of 300,000 shares
of the Company's common stock (the "Series B Warrants"), in each case at an
exercise price of $21.15. The Series A Warrants and Series B Warrants are not
exercisable until May 31, 1997 and August 31, 1997, respectively, and may be
repurchased by the Company for an aggregate of one dollar ($1) for the Series A
Warrants and an aggregate of one dollar ($1) for the Series B Warrants in the
event that, with respect to each of the Series A Warrants and Series B Warrants,
prior to such dates, all indebtedness under the Amended and Restated Agreement
has been repaid in full. Additionally, with respect to the Series B Warrants,
the Company may repurchase such Warrants before August 31, 1997, for an
aggregate of one dollar ($1) if it has received at least $20 million in net cash
proceeds from additional equity.
The Company is currently seeking alternative sources of capital which will
be more advantageous to the Company. Management believes that they will be able
to replace the Amended and Restated Agreement with such sources during fiscal
1997.
On August 8, 1995, the Company acquired all of the outstanding stock of
Infolink Group Limited, a distributor in Australia, for 9,817 shares of the
Company's common stock valued at $0.4 million. The acquisition resulted in the
recording of goodwill of $1.3 million. See Note 6 to Consolidated Financial
Statements for further information.
In June 1995, the Company committed to implement the SAP business systems
software package, expected to cost approximately $6 million, of which
substantially all has been expended for software and consulting costs as of
August 31, 1996. SAP is recognized as a leading provider of client/server based
enterprise-wide software. SAP is replacing the Company's current order
fulfillment, manufacturing and financial systems.
Additions to property, plant and equipment totaled $10.2 million in 1996,
$10.9 million in 1995 and $8.3 million in 1994. Capital additions relate to
production machinery, tooling and equipment, internal information systems
development, sales and product development equipment and expansion and
renovation of research and development facilities. Capital additions are
expected to be approximately $9 million to $12 million in fiscal 1997.
The Company believes that fiscal 1997 capital equipment and system
additions as well as working capital requirements can be funded from operations
or by existing borrowing capacity.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." The statement becomes effective in fiscal 1997. The
Company does not believe that the adoption of this statement will be material to
the Company's consolidated financial statements.
In October 1995, the Financial Accounting Standards Board, issued Statement
No. 123, "Accounting for Stock Based Compensation." This statement becomes
effective in fiscal 1997 and will require the Company to change its disclosures
relating to stock options. The Company currently does not intend to change its
accounting for stock options.
20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NORAND CORPORATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS OF NORAND CORPORATION
We have audited the accompanying consolidated balance sheets of Norand
Corporation (a Delaware corporation) and Subsidiaries as of August 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended August 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Norand Corporation and
Subsidiaries as of August 31, 1996 and 1995, and the results of operations and
cash flows for each of the three years in the period ended August 31, 1996, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
October 15, 1996 (except with respect to the matter discussed
in Note 7, as to which the date is November 20, 1996).
21
<PAGE> 22
NORAND CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31
--------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 3,604 $ 3,809
Accounts receivable, net of allowances for doubtful accounts and
estimated sales returns of $9,278 in 1996 and $6,423 in 1995....... 69,841 68,609
Inventories........................................................... 33,565 36,678
Deferred tax assets................................................... 8,523 6,355
Prepaid expenses and other current assets............................. 8,011 4,643
-------- --------
Total current assets............................................. 123,544 120,094
Noncurrent assets:
Property, plant and equipment, net.................................... 25,601 23,138
Deferred tax assets................................................... 9,318 3,266
Patents and intellectual properties, net.............................. 6,157 6,981
Goodwill, net......................................................... 3,112 2,731
Other noncurrent assets............................................... 4,333 4,378
-------- --------
Total assets..................................................... $172,065 $160,588
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt....................................................... $ 52,460 $ 39,876
Accounts payable...................................................... 23,195 25,517
Accrued payroll and employee benefits................................. 9,809 10,959
Other accrued liabilities............................................. 33,449 19,370
Deferred income....................................................... 10,418 9,595
-------- --------
Total current liabilities........................................ 129,331 105,317
-------- --------
Stockholders' equity:
Common stock, $.01 par value: Authorized 15,000,000 shares; issued and
outstanding 7,664,535 shares in 1996 and 7,534,846 shares in
1995............................................................... 77 75
Additional paid-in capital............................................ 75,237 73,150
Accumulated deficit................................................... (28,482) (14,312)
Equity adjustment from foreign currency translation................... (4,098) (3,642)
-------- --------
Total stockholders' equity....................................... 42,734 55,271
-------- --------
Total liabilities and stockholders' equity....................... $172,065 $160,588
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
22
<PAGE> 23
NORAND CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Product sales revenue.................................. $193,249 $179,266 $153,653
Customer service revenue............................... 42,251 38,648 33,816
--------- --------- ---------
Total revenues.................................... 235,500 217,914 187,469
Cost of products and services............................ 141,744 127,816 96,139
--------- --------- ---------
Gross profit...................................... 93,756 90,098 91,330
OPERATING EXPENSES:
Product development and engineering expenses............. 22,898 22,408 20,554
Selling expenses....................................... 58,347 55,160 44,503
General and administrative expenses.................... 17,006 15,006 12,868
Restructuring charge................................... 4,392 -- --
--------- --------- ---------
Total operating expenses.......................... 102,643 92,574 77,925
--------- --------- ---------
Income (loss) from operations..................... (8,887) (2,476) 13,405
Interest and other expenses.............................. 6,256 3,482 1,437
Litigation settlement.................................... 5,100 -- --
--------- --------- ---------
Income (loss) before income taxes................. (20,243) (5,958) 11,968
Provision (benefit) for income taxes..................... (6,073) (2,252) 5,594
--------- --------- ---------
Net income (loss)................................... $(14,170) $ (3,706) $ 6,374
========= ========= =========
Net income (loss) per common share....................... $(1.87) $(0.50) $0.86
Average number of common and common equivalent shares
outstanding............................................ 7,573,017 7,457,923 7,410,618
</TABLE>
See accompanying notes to the consolidated financial statements.
23
<PAGE> 24
NORAND CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
COMMON STOCK ADDITIONAL FROM FOREIGN
------------------- PAID-IN ACCUMULATED CURRENCY
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION
--------- ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balances, August 31, 1993...................... 7,000,984 $ 70 $ 68,542 $ (16,980) $ (1,864)
Exercises of stock options..................... 349,590 3 573 -- --
Additional expenses of initial public
offering..................................... -- -- (37) -- --
Tax benefit from exercise of stock options..... -- -- 516 -- --
Foreign currency translation................... -- -- -- -- (220)
Net income..................................... -- -- -- 6,374 --
--------- --- ------- -------- -------
Balances, August 31, 1994...................... 7,350,574 73 69,594 (10,606) (2,084)
Exercises of stock options..................... 174,455 2 2,737 -- --
Tax benefit from exercise of stock options..... -- -- 382 -- --
Acquisition of subsidiary...................... 9,817 -- 437 -- --
Foreign currency translation................... -- -- -- -- (1,558)
Net loss....................................... -- -- -- (3,706) --
--------- --- ------- -------- -------
Balances, August 31, 1995...................... 7,534,846 75 73,150 (14,312) (3,642)
Exercises of stock options..................... 129,689 2 2,087 -- --
Foreign currency translation................... -- -- -- -- (456)
Net loss....................................... -- -- -- (14,170) --
--------- --- ------- -------- -------
Balances, August 31, 1996...................... 7,664,535 $ 77 $ 75,237 $ (28,482) $ (4,098)
========= === ======= ======== =======
</TABLE>
See accompanying notes to the consolidated financial statements.
24
<PAGE> 25
NORAND CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $(14,170) $ (3,706) $ 6,374
-------- ------- --------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation............................................. 7,792 5,259 5,620
Amortization............................................. 4,282 2,328 1,472
Amortization of deferred royalty income.................. (1,877) (2,232) (1,337)
Deferred tax benefit..................................... (8,220) (9,621) 0
Provision for doubtful accounts and sales returns........ 7,216 8,802 4,140
Changes in assets and liabilities, excluding effect of
net assets acquired in business acquisition:
Accounts receivable.................................... (8,171) (6,242) (12,864)
Inventories............................................ 3,323 (6,636) (14,555)
Prepaid expenses and other assets...................... (3,101) (1,481) (1,775)
Deferred maintenance contract income................... 2,699 2,211 2,502
Accounts payable and accrued liabilities............... 8,018 8,406 12,005
Accrued restructuring, net............................. 1,596 0 0
-------- ------- --------
Total adjustments................................. 13,557 794 (4,792)
-------- ------- --------
Net cash provided by (used in) operating
activities..................................... (613) (2,912) 1,582
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.................. (10,183) (10,907) (8,264)
Additions to software, patents, and intellectual
properties............................................... (3,296) (5,382) (2,769)
Cash paid for acquisition of business....................... -- -- (85)
-------- ------- --------
Net cash used in investing activities............. (13,479) (16,289) (11,118)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt.................................. -- -- (2,000)
Net borrowings under line of credit agreement............... 12,565 16,803 10,945
Issuances of common stock................................... 2,089 3,391 1,057
Payments of refinancing expenses............................ (680) (150) --
-------- ------- --------
Net cash provided by financing activities......... 13,974 20,044 10,002
-------- ------- --------
Effect of exchange rate changes on cash....................... (87) (21) 2
-------- ------- --------
Net increase (decrease) in cash and cash equivalents.......... (205) 822 468
CASH:
Beginning of period......................................... 3,809 2,987 2,519
-------- ------- --------
End of period............................................... $ 3,604 $ 3,809 $ 2,987
======== ======= ========
Supplemental disclosures of cash flow information:
Interest paid on all debt obligations....................... $ 5,281 $ 2,863 $ 1,431
Net income taxes paid (refunded)............................ (1,591) 5,559 2,682
Supplemental schedule of noncash financing activities:
Debt incurred in connection with acquisition................ -- 376 --
Accounts receivable obtained as a result of acquisition..... -- 905 --
Liabilities assumed as a result of acquisition.............. -- 561 --
</TABLE>
See accompanying notes to the consolidated financial statements.
25
<PAGE> 26
NORAND CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. DESCRIPTION OF BUSINESS
Norand designs, manufactures and markets mobile computing systems and
wireless data communications networks using radio frequency technology. Norand
systems allow businesses worldwide to apply information technology to industrial
and field automation settings. Typical applications include route accounting,
field sales automation, and inventory database management in manufacturing,
warehouse and retail settings. Norand provides hardware, application software,
systems integration and support to thousands of customers in dozens of
industries to improve accountability, productivity and management control.
2. ITALIAN SUBSIDIARY IRREGULARITIES
On September 25, 1995, the Company announced that it had discovered
irregularities during the course of the year-end audit at its Italian
subsidiary. At that time the managing director of the Italian subsidiary was
removed. The Company's investigation of the irregularities in its Italian
subsidiary continued following the initial announcement. The investigation
revealed a complex set of irregularities, which took place over a period of
time. The irregularities were facilitated by third parties, certain of which
were associated with the former managing director.
As a result of the investigation attributable to the Italian subsidiary,
the Company recorded in its 1995 and 1994 financial statements pretax charges
and costs related to sales returns, inventory losses, certain local taxes which
may not be recoverable, professional costs for the investigation, and the
settlement or anticipated settlement of numerous third party claims against the
Italian subsidiary. In total, after restatement for irregular sales and costs,
pretax charges and costs related to the irregularities included in the financial
statements amounted to $8.3 million in 1995 and $1.5 million in 1994.
The Company believes that a thorough investigation has been completed in
order to determine the aggregate losses due to the irregularities. The Company
has continued to pursue potential further recoveries from third parties and
insurance. Such potential recoveries have not been reflected in the accompanying
financial statements. During 1996, the Company settled numerous previously
identified third party claims for costs which approximated previous estimates.
No new claims have been presented that would have a material adverse financial
impact on the Company. Based upon the results of its investigation and the claim
settlements, the Company does not believe that the aggregate charges and
operating losses relating to these known facts and circumstances will materially
exceed the amount of recorded losses and costs already recorded. However, there
can be no assurances that additional third party claims will not be discovered
in future periods which will result in further losses related to this matter.
Such losses could be material to the consolidated results of operations in any
future period. Management does not believe that any such losses will be material
to the Company's consolidated financial position.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements have been prepared on a consolidated
basis to include the accounts of the Company and its wholly-owned subsidiaries.
All significant intercompany amounts and transactions have been eliminated in
consolidation.
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined
on a first-in, first-out basis.
26
<PAGE> 27
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the assets. Production
machinery and equipment (including molds and dies) is depreciated using the
units of production method. All other property, plant and equipment is
depreciated using the straight-line method. The ranges of the estimated useful
lives are as follows: buildings, ten to thirty years; machinery and equipment
and office furniture and equipment, three to ten years; computer equipment and
software purchased to support the Company's business processes, two to five
years; and leasehold improvements, the shorter of the useful lives of the assets
or the term of the leases. Costs of renewals and betterments are capitalized;
repairs and maintenance are expensed as incurred.
SOFTWARE DEVELOPMENT COSTS
The Company capitalizes internal software development costs and qualifying
purchased product software, both of which are developed or acquired for sale to
the Company's customer. The Company capitalized internal software development
costs of $1,500 and $2,098 in 1996 and 1995, respectively. As of August 31, 1996
and 1995, capitalized software development costs, net of amortization were
$3,719 and $3,360, respectively. The capitalization of these costs begins when a
product's economic and technological feasibility has been established and ends
when the product is available for general release to customers. Amortization is
computed on an individual product basis over a three year period. Capitalized
software development costs are included in other noncurrent assets.
PATENTS AND INTELLECTUAL PROPERTIES
Patents include the direct costs of the patents and costs to maintain and
protect the patents. Patents are being amortized over the remaining lives of the
patents, a weighted average of approximately four years. Intellectual properties
include the direct costs of acquisition and are amortized over the useful lives
of the underlying technology, generally three to five years.
GOODWILL
Goodwill from the acquisition of Infolink Group Limited in August 1995, the
acquisition of the Company in October 1988, and other acquisitions, represents
the excess of cost over the fair value of net assets acquired and is being
amortized over 15 and 40 years, respectively, using the straight-line method.
The Company periodically reviews the value of its goodwill to determine if
an impairment has occurred. The Company bases its determination on the
performance, on an undiscounted basis, of the underlying businesses. Based on
its review, the Company does not believe that an impairment of its goodwill has
occurred.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". The statement becomes effective in fiscal 1997. The
Company does not believe that the adoption of this statement will be material to
the Company's consolidated financial statements.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109. Deferred income taxes are recorded to
reflect the tax consequences on future years of differences between the basis of
assets and liabilities for income tax and for financial reporting purposes. In
addition, the amount of any future tax benefits are reduced by a valuation
allowance until it is more likely than not that such benefits will be realized.
Deferred income taxes have not been provided for any income tax liability
which could be incurred upon the repatriation of undistributed earnings of the
Company's consolidated foreign subsidiaries as the Company expects to
indefinitely reinvest these earnings outside the U.S. However, if the Company
were to repatriate the undistributed earnings of the consolidated foreign
subsidiaries, the potential income tax liability would not be material.
27
<PAGE> 28
INCOME PER COMMON SHARE
The computation of primary and fully diluted earnings per share is based on
the weighted average number of common stock and common stock equivalent shares
outstanding during each period. Common stock equivalents consist primarily of
options outstanding under the Company's stock option plans and shares to be
purchased under the employee stock purchase plan.
FOREIGN CURRENCY TRANSLATION
The financial statements of foreign operations are translated into U.S.
dollars in accordance with Statement of Financial Accounting Standard No. 52.
Accordingly, all assets and liabilities are translated at year-end exchange
rates. The gains and losses that result from this process are shown in the
accumulated translation adjustment account in the shareholders' equity section
of the balance sheet. Operating transactions are translated at weighted average
rates during the year. Transaction gains and losses are reflected in net income.
During 1996, the Company did not enter into foreign exchange forward contracts
or foreign exchange option contracts to hedge the effect of foreign currency
fluctuations on the financial statements.
REVENUE RECOGNITION
Revenues from product sales are generally recognized at the time of
shipment of the product. Revenues from customer service sales are recognized
ratably over the maintenance contract period or as the services are performed
for repairs not under warranty or maintenance contracts. Included in deferred
income at August 31, 1996 and 1995, is deferred maintenance revenue of $10,181
and $7,947, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Company is subject to various potential risks and uncertainties which
include, without limitation, continued pressures in the marketplace, the
Company's ability to realize the benefits of the implemented restructuring, the
future need for restructuring (see Note 11), the Company's ability to achieve
increased revenues from new products and achieve lower operating expenses as a
percent of revenues, the Company's ability to obtain debt financing, remain in
compliance with debt covenants and maintain liquidity (see Note 7).
Additionally, the Company is subject to potential risks and uncertainties
related to foreign operations, the effect of technological changes on the
carrying value of inventories and specialized manufacturing equipment, the
estimated realization of deferred tax assets (see Note 8), the potential for
additional third party claims against the Company's Italian subsidiary (see Note
2) and the possible adverse effects of certain pending litigation (see Note 13).
A summary discussion of risks and uncertainties is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
the caption "Safe Harbor Statement."
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in the caption "Product
development and engineering expenses" in the consolidated statements of
operations in the fiscal years ended are $18,474 in 1996, $19,462 in 1995 and
$16,969 in 1994.
RECLASSIFICATIONS
Certain reclassifications were made to the 1995 and 1994 financial
statements to conform to the 1996 presentation.
28
<PAGE> 29
4. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist of the following:
<TABLE>
<CAPTION>
AUGUST 31
------------------
1996 1995
------- -------
<S> <C> <C>
Parts and materials........................................ $16,383 $13,572
Work in process............................................ 8,246 1,799
Finished goods............................................. 5,382 15,808
Field service and sales supplies........................... 3,554 5,499
------- -------
Total.................................................... $33,565 $36,678
======= =======
</TABLE>
5. NONCURRENT ASSETS
Noncurrent assets include the following:
<TABLE>
<CAPTION>
AUGUST 31
------------------
1996 1995
------- -------
<S> <C> <C>
Property, plant and equipment:
Land....................................................... $ 225 $ 225
Buildings.................................................. 3,394 3,362
Machinery and equipment.................................... 30,132 26,872
Office furniture and equipment............................. 26,690 21,757
Leasehold improvements..................................... 703 702
------- -------
Subtotal, at cost.......................................... 61,144 52,918
Less accumulated depreciation.............................. 35,543 29,780
------- -------
Total, net............................................... $25,601 $23,138
======= =======
Patents and intellectual properties........................ $10,786 $10,670
Less accumulated depreciation and amortization............. 4,629 3,689
------- -------
Total, net............................................... $ 6,157 $ 6,981
======= =======
Goodwill................................................... $ 3,588 $ 3,088
Less accumulated amortization.............................. 476 357
------- -------
Total, net............................................... $ 3,112 $ 2,731
======= =======
</TABLE>
6. ACQUISITION
On August 8, 1995, the Company acquired all the outstanding stock of
Infolink Group Limited (Infolink), a distributor in Australia, for 9,817 shares
of the Company's common stock valued at $0.4 million. The acquisition was
accounted for using the purchase method. Accordingly, the purchase price was
allocated to the assets and liabilities acquired based on their estimated fair
values. This treatment resulted in approximately $1.3 million of estimated
goodwill. The goodwill is being amortized over fifteen years. The prior
operations and financial position of Infolink were not material.
7. SHORT-TERM DEBT
At August 31, 1995, the Company had $39.5 million of borrowings outstanding
under a credit facility (the "Agreement") with a group of lending banks. The
Agreement allowed for $60 million of maximum borrowings.
In October 1995, as a result of anticipated non-compliance with the
Agreement, the Company and the lending group amended and recollateralized the
Agreement resulting in an increase in the effective interest rate by 1.0 percent
on LIBOR borrowings and 0.5 percent on prime rate borrowings.
29
<PAGE> 30
As a result of the losses for the year ended August 31, 1995 and losses for
the quarter ended December 2, 1995, the Company was not in compliance with
certain covenants under the amended Agreement. Borrowings under the amended
Agreement to fund operations and capital additions had increased to $57.4
million in early December, 1995. Due to covenant violations, in December 1995,
available borrowings under the amended Agreement were frozen at $57.4 million.
On January 25, 1996, the Company and the lending group amended and restated
the Agreement (the "Restated Agreement") wherein the lending group agreed to
waive any defaults under or violations of the Agreement occurring on or before
January 25, 1996. The Restated Agreement provided for an amortizing term loan
beginning at $52.0 million and amortizing by $1.0 million per month beginning
September 15, 1996 to $48.0 million on December 15, 1996, and up to $11.5
million in borrowing base revolving loans. The Restated Agreement was limited to
$63.5 million in aggregate borrowings. Obligations under the Restated Agreement
were to mature on December 31, 1996. The Company's obligations under the
Restated Agreement were secured by substantially all of the assets of the
Company. The effective interest rate, effective January 25, 1996, under the
Restated Agreement was the agent's alternate base rate (ABR) plus 1.75% for all
borrowings up to $57.4 million and ABR + 2.75% for borrowings above $57.4
million. The Restated Agreement contained financial covenants, measured at
varying dates, including covenants relating to tangible net worth, capital
additions and cash flows. The Company paid a commitment fee at closing amounting
to 0.5% of the total facility.
At August 31, 1996, the Company had $52.0 million of borrowings outstanding
under the Restated Agreement. In November 1996, as a result of noncompliance
with certain covenants under the Restated Agreement due to losses incurred for
the year ended August 31, 1996, the Company and its lenders amended the Restated
Agreement (the "Amended and Restated Agreement") wherein the lending group has
agreed to waive any defaults under or violations of the Restated Agreement
occurring on or before August 31, 1996. The Amended and Restated Agreement
provides for maximum borrowings of $60.5 million. Maximum allowable borrowings
decline to $59.5 million on December 16, 1996 and then decline periodically over
the period to $48.25 million on September 15, 1997. Obligations under the
Amended and Restated Agreement will mature on September 30, 1997. Obligations
under the Amended and Restated Agreement will continue to be secured by
substantially all of the assets of the Company. No foreign currency borrowings
are permitted under the Amended and Restated Agreement. The effective interest
rate increases periodically September 15, 1996 to ABR plus 4% on December 31,
1996 for all borrowings. The Amended and Restated Agreement will continue to
contain financial covenants relating to tangible net worth, capital additions,
earnings and cash flows.
In addition to a fee amounting to $0.3 million which was paid on September
15, 1996 to maintain the aggregate borrowing capacity under the Restated
Agreement, the Company will be required to pay additional fees to maintain
aggregate borrowings under the Amended and Restated Agreement amounting to 0.1%
of the total facility due at closing, 0.1% of the total facility due monthly
from January 31, 1997 to April 30, 1997, and 0.25% of the total facility due
June 30, 1997.
Concurrently with entering into the Amended and Restated Agreement, the
Company issued to its lending group Series A Warrants exercisable for an
aggregate of 250,000 shares of the Company's common stock (the "Series A
Warrants") and Series B Warrants exercisable for an aggregate of 300,000 shares
of the Company's common stock (the "Series B Warrants"), in each case at an
exercise price of $21.15. The Series A Warrants and Series B Warrants are not
exercisable until May 31, 1997 and August 31, 1997, respectively, and may be
repurchased by the Company for an aggregate of one dollar ($1) for the Series A
Warrants and an aggregate of one dollar ($1) for the Series B Warrants in the
event that, with respect to each of the Class A Warrants and Class B Warrants,
prior to such dates, all indebtedness under the Amended and Restated Agreement
has been repaid in full. Additionally, with respect to the Series B Warrants,
the Company may repurchase such Warrants before August 31, 1997, for an
aggregate of one dollar ($1) if it has received at least $20 million in net cash
proceeds from additional equity.
The Company is currently seeking alternative sources of capital which will
be more advantageous to the Company. Management believes that they will be able
to replace the Amended and Restated Agreement with such sources during fiscal
1997.
30
<PAGE> 31
As of August 31, 1996 and 1995, the Company had borrowings outstanding at
its Australian subsidiary which amounted to $0.5 million and $0.4 million,
respectively.
The carrying amount for the short-term borrowing recorded in the financial
statements approximates fair value. The weighted average interest rates paid
under the above agreements were 11.57% (1996), 7.68% (1995) and 6.94% (1994).
The average month-end balance outstanding was $53,716 (1996), $38,400 (1995) and
$14,780 (1994). The maximum amount outstanding in each fiscal year was $63,000
(1996), $52,400 (1995) and $27,500 (1994).
8. INCOME TAXES
The components of income (loss) before income taxes are:
<TABLE>
<CAPTION>
AUGUST 31
------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Domestic........................................................ $(19,748) $ 3,188 $12,491
International................................................... (495) (9,146) (523)
-------- ------- -------
$(20,243) $(5,958) $11,968
======== ======= =======
</TABLE>
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31
----------------------------
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Current:
Federal......................................................... $ -- $ 2,990 $2,237
State........................................................... 87 321 488
Foreign......................................................... 2,060 4,058 2,869
------- ------- ------
2,147 7,369 5,594
Deferred.......................................................... (8,220) (9,621) --
------- ------- ------
Total........................................................... $(6,073) $(2,252) $5,594
======= ======= ======
</TABLE>
The income tax provision differs from a provision computed at the U.S.
statutory rate as follows:
<TABLE>
<CAPTION>
AUGUST 31
----------------------------
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Statutory rate provision.......................................... $(6,883) $(2,026) $4,069
State income taxes (net of Federal benefit)....................... 57 212 322
Foreign income taxes.............................................. 688 118 454
Increase (decrease) in valuation allowance........................ 2,792 (1,948) 766
Research and development tax credit carryforwards................. (2,615) -- --
Refund from NOL carryback......................................... (2,323) -- --
Additional reserves............................................... 1,213 1,303 --
Deemed dividend from subsidiary................................... 820 -- --
Other............................................................. 178 89 (17)
------- ------- ------
$(6,073) $(2,252) $5,594
======= ======= ======
</TABLE>
31
<PAGE> 32
The consolidated balance sheet includes the following:
<TABLE>
<CAPTION>
AUGUST 31
----------------
1996 1995
------ ------
<S> <C> <C>
Current income tax payable:
Federal................................................................... $2,716 $2,312
State and local........................................................... 86 82
Foreign................................................................... 5,201 4,405
------ ------
$8,003 $6,799
====== ======
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31
------------------
1996 1995
------- -------
<S> <C> <C>
Net deferred tax assets (liabilities):
Capitalized software.................................................... $ 2,874 $ 3,275
Noncompete covenant..................................................... 2,121 2,417
Domestic net operating loss............................................. 7,559 --
Foreign net operating losses............................................ 5,913 5,022
Depreciation and amortization........................................... (3,081) (2,304)
Inventory obsolescence reserve and capitalization....................... 1,832 1,294
Vacation accruals....................................................... 1,154 1,127
Research and development tax credit carryforwards....................... 3,827 1,213
AMT tax credit carryforwards............................................ 1,365 --
Deferred maintenance revenue............................................ 1,126 563
Other................................................................... 2,177 3,249
------- -------
Subtotal.................................................................. 26,867 15,856
Valuation allowance....................................................... (9,026) (6,235)
------- -------
Net deferred tax assets................................................. $17,841 $ 9,621
======= =======
</TABLE>
In March 1996, the Company effectively wrote off its investment in its
Italian subsidiary, for tax purposes, resulting in a net operating loss (NOL)
which was carried back to prior years. The NOL carryback generated a $2.3
million refund. The Company has determined that based on its domestic
profitability, that it is more likely than not (except for certain foreign NOLs
which expire in the years 2000 and 2001 and remaining R&D tax credits) that
recorded deferred tax assets will be realized in future periods. In 1996, the
Company increased the deferred tax asset valuation allowance to offset the
increase in certain foreign NOLs and R&D tax credits. The Company also provided
additional reserves for income taxes related to fiscal years which remain
subject to potential examination of respective taxing jurisdictions. Income
taxes payable are included in other current liabilities.
9. EMPLOYEE BENEFIT PLANS
Employees of the Company who meet certain eligibility requirements can
participate in the Company's 401(k) Savings and Investment Plan. Under the Plan,
the Company may, at its discretion, match the employee contributions. The
Company recorded expenses related to its matching contributions for fiscal years
ended of $1,197 (1996), $1,230 (1995) and $1,140 (1994).
In 1994, the Company established the Norand Employee Stock Purchase Plan
(the Plan) which enables eligible employees to purchase the Company's common
stock at 85% of its fair market value. The fair market value of the common stock
used to determine the purchase price is based on the lower of the closing price
of the stock on the first or last business day of the Plan year which ends on
December 31. Employee contributions, which are made through payroll deductions
throughout the Plan year, are limited to 10 percent of total compensation. In
March 1996, and January 1995, 77,984 shares and 81,734 shares, respectively were
32
<PAGE> 33
purchased under the Plan. The Company has an additional 440,282 shares reserved
for future issuance under its Employee Stock Purchase Plan.
10. LEASE COMMITMENTS
The Company is obligated as lessee under certain noncancelable operating
leases for office space and its manufacturing facility, and is also obligated to
pay insurance, maintenance and other operating costs associated with the leases.
The leases have various renewable options and terms. Rent expense under these
operating leases was $2,887 in 1996, $2,833 in 1995 and $2,431 in 1994.
Future minimum annual lease payments as of August 31, 1996, under
agreements classified as operating leases with noncancelable terms in excess of
one year are as follows:
<TABLE>
<S> <C>
1997................................................... $2,503
1998................................................... 1,752
1999................................................... 1,083
2000................................................... 670
2001 and thereafter.................................... 510
------
Total............................................. $6,518
======
</TABLE>
11. RESTRUCTURING
During the second quarter of 1996, the Company recorded a charge of $5.2
million ($3.6 million after-tax) related to a company-wide restructuring of
operations. The restructuring charge was reduced by $0.8 million in the fourth
quarter as a result of favorable experience compared to previous cost estimates.
The restructuring charge included $3.7 million for severance and other costs
related to reductions in the Company's domestic and international workforce and
$0.7 million for lease exit costs associated with the closing or consolidating
of certain facilities. The Company believes that annual cost savings resulting
from the restructuring charge will be in excess of these charges. However, no
assurances can be given as to the actual extent of any savings or improvements
that might be realized or that additional actions and additional charges against
earnings might not occur in the future. As of August 31, 1996, approximately
$1.6 million of the charge has not yet been expended. The Company expects to
expend the remaining balance, comprised primarily of amounts due in installments
under severance and lease agreements, in fiscal 1997.
12. STOCK OPTIONS
The Company has three stock option plans for its officers, directors and
other key employees. The options under the plans generally become exercisable in
equal installments over a three-to five-year period commencing on the first
anniversary date after the date of grant and quarterly thereafter. Options
canceled due to terminations or expiration of exercise period are returned to
the pool of options available to be granted. The exercise price is equal to the
market price for the Company's common stock on the date of grant and ranges from
$1.10 to $45.25.
33
<PAGE> 34
The following is a summary of the activity in the Company's common stock
option plans for the years ended August 31, 1994, 1995 and 1996 and the
outstanding balance of options issued:
<TABLE>
<CAPTION>
AVERAGE
PRICE PER
SHARES SHARE
--------- ---------
<S> <C> <C>
August 31, 1993........................................... 686,726 $ 7.67
Granted................................................. 281,970 28.72
Exercised............................................... (313,885) 1.69
Canceled................................................ (13,651) 20.32
--------- ------
August 31, 1994........................................... 641,160 19.93
Granted................................................. 241,825 31.44
Exercised............................................... (92,721) 9.12
Canceled................................................ (66,807) 17.27
--------- ------
August 31, 1995........................................... 723,457 25.41
Granted................................................. 556,215 16.63
Exercised............................................... (43,785) 16.34
Canceled................................................ (171,447) 25.75
--------- ------
August 31, 1996........................................... 1,064,440 $ 21.19
========= ======
</TABLE>
At August 31, 1996, there were 297,319 shares exercisable and 1,552,278
shares reserved for issuance under the above option plans.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation." This statement becomes
effective in fiscal 1997 and will require the Company to change its disclosures
relating to stock options. The Company currently does not intend to change its
accounting for stock options.
13. LITIGATION
In October 1995, two class action complaints were filed against the Company
and certain of its officers in United States District Court in Cedar Rapids,
Iowa, seeking unspecified damages on behalf of a purported class of purchasers
of Norand stock on the ground that the defendants violated the federal
securities laws by allegedly making materially false and misleading statements
concerning the Company's results of operations and future prospects during the
period from March 20, 1995 until September 25, 1995. On November 24, 1995, a
third lawsuit was filed in the same court raising substantially the same claims
on behalf of a broader purported class of purchasers of Norand stock.
All three lawsuits were consolidated under the caption In re Norand
Corporation Securities Litigation (Master File No. C 95-323). On December 23,
1995, a single amended and consolidated complaint was filed in the consolidated
action, superseding all previous pleadings. The complaint was filed on behalf of
a purported class consisting of purchasers of Norand stock from September 26,
1994 through November 17, 1995, and named as defendants the Company, five of its
present or former senior officers, and Arthur Andersen LLP, the Company's
independent public accountant. The consolidated complaint alleged, among other
things, that the Norand defendants materially overstated the Company's revenues
and earnings by improperly recording sales in its Italian subsidiary and misled
the market by failing to disclose alleged problems with certain of its products
that affected its revenues in the fourth quarter of fiscal 1995.
On August 28, 1996, the Company announced that it had signed an agreement
to settle the consolidated complaint and secure releases for all of the
defendants with the exception of Arthur Andersen. The Company believes its
officers and directors acted properly regarding this matter and denies any
wrongdoing. Nevertheless, the Company feels it is in the best interest of the
Company and its shareholders to settle the matter and devote management time and
energy to running the business.
34
<PAGE> 35
The settlement, which calls for the payment of $4.5 million in cash and
$4.5 million worth of Norand stock, is subject to approval by the District
Court, following notice to the class and a hearing on the fairness of the
settlement. That hearing is scheduled for December 19, 1996. The cash portion of
the settlement is covered by insurance. The Company has the option to pay $4.5
million in cash instead of issuing the stock.
The settlement resulted in a fourth quarter charge of $4.8 million
including additional legal costs related to the portion of the settlement not
covered by insurance. The Company had previously accrued $0.3 million in the
first quarter for related legal costs.
The Company is also subject to certain legal proceedings and claims which
have arisen in the ordinary course of its business and have not been finally
adjudicated. In management's opinion, the ultimate resolution of these matters
will not be material to the Company's consolidated financial position or results
of operations.
14. BUSINESS SEGMENT DATA
The Company's operations consist of a single business segment which
designs, develops, manufactures, markets and services hand-held data
communication computer systems. The Company does not believe it is dependent
upon any one customer or group of customers. Transfers between geographic areas
were at cost plus a negotiated mark-up. Sales and selected financial information
by geographic area for the fiscal years ended August 31, 1996, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1996 UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED
- ---------------------------------------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 203,282 $57,397 $(25,179) $235,500
Income (loss) from operations................. (8,008) (809) (70) (8,887)
Interest and other expenses................... (6,256)
Litigation settlement......................... (5,100)
Loss before income taxes...................... (20,243)
Identifiable assets........................... 138,058 34,007 172,065
<CAPTION>
1995 UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED
- ---------------------------------------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 190,260 $56,156 $(28,502) $217,914
Income (loss) from operations................. 6,240 (8,543) (173) (2,476)
Interest and other expenses................... (3,482)
Loss before income taxes...................... (5,958)
Identifiable assets........................... 120,919 39,669 160,588
<CAPTION>
1994 UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED
- ---------------------------------------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 168,849 $35,463 $(16,843) $187,469
Income (loss) from operations................. 14,306 (418) (483) 13,405
Interest and other expenses................... (1,437)
Loss before income taxes...................... 11,968
Identifiable assets........................... 98,157 35,274 133,431
</TABLE>
A substantial portion of the Company's international operations are in
Europe. Other geographic areas of operations include Canada, Mexico, Australia
and Japan. International operating income does not include the expenses of
corporate administration. International identifiable assets are principally
trade receivables and inventories. United States revenue includes export sales
of $8,217 in 1996, $11,120 in 1995 and $5,981 in 1994, and also includes
transfers between geographic areas which are eliminated.
35
<PAGE> 36
15. SELECTED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following tables set forth unaudited quarterly financial information
for the years ended August 31, 1996 and 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
YEAR ENDED AUGUST 31, 1996 QUARTER QUARTER QUARTER QUARTER
- -------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.......................................... $49,806 $56,032 $60,216 $69,446
Gross profit............................................ 18,840 20,943 25,901 28,072
Income (loss) from operations........................... (5,507) (9,351) 2,823 3,148
Net income (loss)....................................... (4,843) (7,721) 789 (2,395)
Primary earnings per share.............................. (0.63) (1.02) 0.10 (0.32)
Fully diluted earnings per share........................ (0.63) (1.02) 0.10 (0.32)
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
YEAR ENDED AUGUST 31, 1995 QUARTER QUARTER QUARTER QUARTER
- -------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.......................................... $47,130 $53,920 $57,696 $59,168
Gross profit............................................ 20,975 24,670 27,052 17,401
Income (loss) from operations........................... 687 3,059 5,729 (11,951)
Net income (loss)....................................... (442) 1,324 3,278 (7,866)
Primary earnings per share(1)........................... (0.06) 0.17 0.43 (1.05)
Fully diluted earnings per share(1)..................... (0.06) 0.17 0.43 (1.05)
</TABLE>
- -------------------------
(1) The sum of earnings per share for the four quarters does not equal the
related net income per share for the full year due to quarterly variations
in shares resulting from stock options
16. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
The analysis of the allowance for doubtful accounts and estimated sales
returns is as follows:
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------------------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ------------------------------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts and
estimated sales returns:
Year ended August 31, 1996......... $6,423 $7,216 $0 $4,361 $ 9,278
Year ended August 31, 1995......... 1,973 8,802 0 4,352 6,423
Year ended August 31, 1994......... 1,451 4,140 0 3,618 1,973
</TABLE>
- -------------------------
Deductions include doubtful accounts charged off, net of recoveries, including
recoverable cost of returned equipment.
36
<PAGE> 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the names and ages of Norand's directors and
executive officers and the positions they hold with Norand:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH NORAND
- ------------------------------ --- -----------------------------------------------------
<S> <C> <C>
N. Robert Hammer.............. 54 Chairman, President and Chief Executive Officer
Keith B. Geeslin.............. 43 Director
Charles G. Moore III.......... 53 Senior Director
Fred W. Wenninger............. 57 Director
Hatim A. Tyabji............... 51 Director
Thomas O. Miller.............. 45 Senior Vice President, Worldwide Sales and Marketing
Alan G. Bunte................. 43 Vice President, Strategic Planning
John A. Niemzyk............... 45 Vice President, Operations and Informations
Technology and Chief Information Officer
Scott D. Mercer............... 30 Vice President, Norand International Corporation,
European Operations
Glenn J. Lundgren............. 49 Vice President, Americas Sales and Systems
Robert A. Hurd................ 49 Controller and Assistant Treasurer
</TABLE>
N. Robert Hammer has been Chairman, President and Chief Executive Officer
of Norand since October 1988. Mr. Hammer received a Bachelor of Science degree
from Columbia University in 1965, and a Master of Business Administration degree
from Columbia University in 1967.
Keith B. Geeslin has been a director of the Company since 1988. Mr. Geeslin
is a General Partner of the Sprout Group, a division of DLJ Capital Corporation,
where he has been employed since 1984. In addition, he is a General Partner of
the general partner of a series of investment funds managed by the Sprout Group.
In addition to the Company, Mr. Geeslin is a director of Actel Corporation, SDL,
Inc., and several privately-held companies. Mr. Geeslin received a Bachelor of
Science, Electrical Engineering degree from Stanford University in 1975, a
Master of Arts, Philosophy, Politics and Economics degree from Oxford University
in 1977 and a Master of Science, Engineering-Economic Systems degree from
Stanford University in 1978.
Charles G. Moore III has been a director of the Company since 1988 and
Senior Director since January 1996. Since March 1994, Mr. Moore has been
president of Little Diamond Island Enterprises, a venture capital investment
firm. Mr. Moore was Chairman and Chief Executive Officer of Digital
Communications Associates, Inc., a manufacturer of hardware and software
products for the personal computer networking environment, from November 1993 to
March 1994. From January 1982 to June 1993 Mr. Moore was a General Partner of
Welsh, Carson, Anderson & Stowe, a venture capital investment firm. Mr. Moore
serves on the board of directors of one privately-held company. Mr. Moore
received a Bachelor of Arts, Mathematics degree from Dartmouth College in 1965
and Master of Science and Ph.D., Computer and Communications degrees from the
University of Michigan in 1967 and 1971, respectively. From 1972 to 1975, Mr.
Moore served on the faculty of Cornell University in the Department of Computer
Science.
Fred W. Wenninger has been a director of the Company since 1989. Since
August 1995, Mr. Wenninger has served as President and Chief Executive Officer
of Keytronic Corp., a manufacturer of computer keyboards. From May 1989 to
December 1993, Mr. Wenninger was President and from May 1989 to October 1993 he
was also Chief Executive Officer of Iomega Corporation, a computer disk drive
manufacturer. Mr. Wenninger is also a director of Keytronic Corp. and Hach
Company. Mr. Wenninger received a Bachelor of Science, Physics degree and Master
of Science and Ph.D., Engineering degrees from Oklahoma State University in
1959, 1962 and 1964, respectively.
37
<PAGE> 38
Hatim A. Tyabji has been a director of the Company since March 1995. Mr.
Tyabji is Chairman, President and Chief Executive Officer of VeriFone, Inc., a
global provider of transaction automation solutions for the delivery of
electronic payment services; he has been President and CEO since 1986 and
Chairman since 1992. Mr. Tyabji earned a Bachelor of Science, Electrical
Engineering degree from the College of Engineering in Porrna, India, in 1967, a
Master of Science, Electrical Engineering degree from the State University of
New York at Buffalo in 1969, and a Master of Business Administration from
Syracuse University in 1975. Mr. Tyabji is also a graduate of the Stanford
Executive Program.
Thomas O. Miller has been Senior Vice President of Norand since August
1995. From September 1992 until August 1995, Mr. Miller served as Vice
President, Mobile Systems Division of Norand. From April 1991 to August 1992,
Mr. Miller was Vice President of Marketing and Customer Service of Norand. Mr.
Miller joined Norand in 1982. Mr. Miller became Vice President of Norand with
responsibility for product sales and distribution marketing in April 1987.
Marketing and customer service were added to his responsibilities in April 1988.
Mr. Miller is a director of Eagle Point Software. Mr. Miller received a Bachelor
of Science degree from Western Illinois University in 1973, and a Master of
Business Administration degree from Western Illinois University in 1974.
Alan G. Bunte has been Vice President, Strategic Planning of Norand since
June 1993. Mr. Bunte joined Norand in 1981 and has held a variety of posts
including Director of Strategic Planning from 1989 until June 1993, and Director
of Marketing from 1988 to 1989. Mr. Bunte received a Bachelor of Business
Administration degree from the University of Iowa in 1975, and a Master of
Business Administration degree from the University of Iowa in 1977.
John A. Niemzyk has been Vice President, Operations and Information Systems
since January 1996. Mr. Niemzyk joined Norand in 1988 as Chief Information
Officer. Mr. Niemzyk received his Bachelor of Business Administration degree
from the University of Wisconsin in 1973 and a Master of Business Administration
degree from the University of Wisconsin in 1975.
Scott D. Mercer has been Vice President of Norand International
Corporation, European Operations, since March 1996. From May 1995 to March 1996,
Mr. Mercer served as Managing Director, European Operations. From June 1993 to
May 1995, Mr. Mercer was Director of Marketing -- Europe. Mr. Mercer joined
Norand in June 1993. Prior to joining Norand, Mr. Mercer was Vice President of
Sales and Marketing for Tandy Grid UK.
Glenn J. Lundgren has been Vice President, Sales & Systems Americas since
September 1996. From April 1995 to September 1996, Mr. Lundgren was Director of
Sales and Systems for the Americas. He joined Norand in 1985 as a Sales Manager.
Mr. Lundgren received his Bachelor of Science degree in Marketing from the
University of North Dakota in 1972.
Robert A. Hurd has been Controller of Norand since September 1991 and
Assistant Treasurer of Norand since June 1989. Mr. Hurd received a Bachelor of
Business Administration degree from Western Illinois University in 1968, and a
Master of Business Administration degree from the University of Illinois in
1971.
Each director holds office until his or her successor is elected and
qualified or until his or her earlier death, resignation, retirement,
disqualification or removal. The executive officers of the Company serve at the
discretion of the board of directors.
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten-percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the Company's 1996 fiscal year all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with except that Mr. John A. Niemzyk
and Mr. Scott D. Mercer each filed one report late.
38
<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the annual, long-term and other
compensation for services rendered to the Company for the fiscal year ended
August 31, 1996 and the prior two fiscal years paid or awarded to those persons
who were, at August 31, 1996, (i) the Company's chief executive officer, and
(ii) the Company's four most highly compensated executive officers other than
the chief executive officer (collectively, including the Company's chief
executive officer, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------- PAYOUTS
-------------------------------- RESTRICTED --------
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($) ($)
- --------------------- ---- ------- ------- ------------ ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N. Robert Hammer..... 1996 340,000 -- -- 0 35,100 0 8,269(3)
Chief Executive 1995 313,333 -- -- 0 20,000(2) 0 7,540(3)
Officer 1994 300,000 143,000 -- 0 12,000 0 6,924(3)
Thomas O. Miller..... 1996 200,000 -- -- 0 22,975 0 5,592(5)
Senior Vice 1995 160,113 17,341 -- 0 8,500(4) 0 5,588(5)
President 1994 141,251 80,000 -- 0 8,800 0 5,546(5)
Scott D. Mercer...... 1996 152,838 50,760 -- 0 16,760 0 0
Vice President, 1995 93,684 61,260 -- 0 4,700(6) 0 0
Norand International 1994 74,448 18,485 -- 0 500 0 0
Corporation
Alan G. Bunte........ 1996 139,833 -- -- 0 14,285 0 4,635(8)
Vice President, 1995 129,833 20,000 -- 0 7,000(7) 0 5,465(8)
Strategic Planning 1994 121,500 41,000 -- 0 -- 0 3,657(8)
John A. Niemzyk...... 1996 133,752 -- -- 0 25,415 0 5,491(10)
Vice President, 1995 117,153 28,000 -- 0 4,400(9) 0 4,883(10)
Operations and 1994 98,208 26,000 -- 0 1,300 0 4,820(10)
Information
Technology and Chief
Information Officer
</TABLE>
- -------------------------
(1) During the fiscal years covered, no Named Executive Officer received any
other annual compensation in an aggregate amount exceeding the lesser of
either $50,000 or 10% of his total annual salary and bonus reported in the
preceding two columns.
(2) Represents 20,000 options originally authorized pursuant to the Company's
Long-Term Performance Program on March 31, 1995, at an exercise price of
$35.00, and subsequently canceled and reissued on May 3, 1995, at a
repriced exercise price of $30.25.
(3) Represents the Company's matching contribution to the Company's Section
401(k) deferred compensation plan of $4,750 in 1996, $4,620 in 1995, and
$4,620 in 1994, and represents the value of term life insurance provided in
excess of $50,000 of $3,519 in 1996, $2,920 in 1995, and $2,304 in 1994.
(4) Represents 8,500 options originally authorized pursuant to the Company's
Long-Term Performance Program on March 31, 1995, at an exercise price of
$35.00, and subsequently canceled and reissued on May 3, 1995, at a
repriced exercise price of $30.25.
(5) Represents the Company's matching contribution to the Company's Section
401(k) deferred compensation plan of $4,724 in 1996, $5,058 in 1995, and
$5,171 in 1994, and represents the value of term life insurance provided in
excess of $50,000 of $867 in 1996, $530 in 1995, and $375 in 1994.
39
<PAGE> 40
(6) Represents 700 options originally authorized pursuant to the Company's
Long-Term Performance Program on March 31, 1995, at an exercise price of
$35.00, and subsequently canceled and reissued on May 3, 1995, at a
repriced exercise price of $30.25 plus an additional 4,000 options issued
on May 17, 1995, at an exercise price of $33.00.
(7) Represents 7,000 options originally authorized pursuant to the Company's
Long-Term Performance Program on March 31, 1995, at an exercise price of
$35.00, and subsequently canceled and reissued on May 3, 1995, at a
repriced exercise price of $30.25.
(8) Represents the Company's matching contribution to the Company's 401(k)
deferred compensation plan of $4,219 in 1996, $5,142 in 1995, and $3,453 in
1994, and represents the value of term life insurance provided in excess of
$50,000 of $416 in 1996, $322 in 1995, and $204 in 1994.
(9) Represents 1,400 options originally authorized pursuant to the Company's
Long-Term Performance Program on March 31, 1995, at an exercise price of
$35.00, and subsequently canceled and reissued on May 3, 1995, at a
repriced exercise price of $30.25 plus an additional 3,000 options issued
on June 12, 1995, at an exercise price of $36.13.
(10) Represents the Company's matching contribution to the Company's 401(k)
deferred compensation plan of $5,198 in 1996, $4,620 in 1995, and $4,620 in
1994 and represents the value of term life insurance provided in excess of
$50,000 of $293 in 1996, $263 in 1995, and $200 in 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table summarizes the grants of stock options awarded to the
Named Executive Officers during the fiscal year ended August 31, 1996 under the
Company's 1989 Stock Option Plan and the Company's Long-Term Performance
Program.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
----------------------------------------------- AT ASSUMED ANNUAL
% OF RATES OF STOCK
OPTIONS/ TOTAL PRICE APPRECIATION
SAR OPTIONS/ EXERCISE FOR OPTION TERM(2)
GRANTED SAR PRICE EXPIRATION ------------------
NAME (#) GRANTED ($/SH)(1) DATE 5% ($) 10% ($)
- ------------------------------------- -------- -------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
N. Robert Hammer..................... 35,100 6.31% 16.50 03/28/06 364,224 923,016
Thomas O. Miller..................... 7,500 1.35% 18.00 02/05/06 84,901 215,155
Thomas O. Miller..................... 15,475 2.78% 16.50 03/28/06 160,580 406,943
Alan G. Bunte........................ 5,000 0.90% 18.00 02/05/06 56,600 143,437
Alan G. Bunte........................ 9,285 1.67% 16.50 03/28/06 96,348 244,165
Scott D. Mercer...................... 10,000 1.80% 18.00 02/05/06 113,201 286,874
Scott D. Mercer...................... 6,760 1.22% 16.50 03/28/06 70,147 177,766
John A. Niemzyk...................... 20,000 3.60% 13.25 01/24/06 166,657 422,342
John A. Niemzyk...................... 5,415 0.97% 16.50 03/28/06 56,190 142,397
</TABLE>
- -------------------------
(1) The exercise price equals the last reported sale price of the Common Stock
on the NASDAQ National Market System on the date of grant of the options.
(2) The potential realizable dollar value of a grant is the product of: (a) the
difference between (i) the product of the per-share market price at the time
of the grant and the sum of 1 plus the stock appreciation rate compounded
annually over the term of the option (here, 5% and 10%), and (ii) the
per-share exercise price of the option, and (b) the number of securities
underlying the grant at fiscal year-end.
40
<PAGE> 41
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information concerning options exercised by
the Named Executive Officers during the fiscal year ended August 31, 1996 and
the value at August 31, 1996 of unexercised options.
<TABLE>
<CAPTION>
VALUE ($) OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED AUGUST 31, 1996 AUGUST 31, 1996
ON VALUE --------------- ---------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
N. Robert Hammer............................. 0 0 112,629/69,971 658/12,504
Thomas O. Miller............................. 0 0 23,422/39,153 290/ 5,513
Alan G. Bunte................................ 0 0 19,193/20,014 10,033/ 3,308
Scott D. Mercer.............................. 0 0 3,996/19,484 127/ 2,408
John A. Niemzyk.............................. 0 0 5,914/27,245 39,595/67,179
</TABLE>
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors, except Mr. Moore, receive
an annual fee of $12,000 (payable $3,000 per quarter) as compensation for their
services as directors, a fee of $1,000 for each board meeting attended in person
and $750 for each committee meeting attended in person. Mr. Moore serves as Lead
Director of the Board of Directors. Mr. Moore receives an annual fee of $24,000
(payable $6,000 per quarter) as compensation for his services as Lead Director,
a fee of $2,000 for each board meeting attended in person and $750 for each
committee meeting attended in person. Directors are also reimbursed for
reasonable costs associated with attendance at board and committee meetings.
Non-employee members of the Board of Directors also participate in the
Company's Stock Option Plan for Non-Employee Directors (the "Plan"), which was
adopted by the Board of Directors effective March 16, 1994 (the "Effective
Date"), and approved by the stockholders as of December 16, 1994. Pursuant to
the Plan, each individual who was a non-employee director as of the Effective
Date (Messrs. Geeslin, Moore, and Wenninger) was granted an option to purchase
6,000 shares of Common Stock as of the Effective Date, and each individual who
became a non-employee director after the Effective Date was granted an option to
purchase 5,000 shares of Common Stock as of the date of his initial appointment
as a non-employee director (in each case, the "Initial Grant"). Each
non-employee director who continues as a director is automatically granted an
option to purchase 2,000 shares of Common Stock on each anniversary of his
Initial Grant. In addition, Mr. Moore is automatically granted an additional
option to purchase 2,000 shares of Common Stock on each anniversary of his
Initial Grant. Options awarded under the Plan become exercisable with respect to
one-twentieth of the total shares as of the last day of each quarter anniversary
of the date of the award, with the exception of the options awarded in the
Initial Grant to non-employee directors who became directors after the Effective
Date, which become exercisable with respect to one-fifth of the shares on the
first anniversary of the date of the award and thereafter as to one-twentieth of
the total shares as of the last day of each quarter anniversary. Each such
option awarded under the Plan bears an exercise price per share of Common Stock
equal to the greater of par value or the fair market value of Common Stock on
the date the option is granted.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company's employment policy provides that upon termination, with
certain exceptions, each of the Company's vice presidents is entitled to
severance pay in the amount of six months pay plus one additional month's pay
for each year of service to the Company, not to exceed a combined total of 18
months. In the event of a change in control, enhanced severance may be payable
in the event of termination following a change in control on account of certain
events, such as elimination of a position, adverse change in duties or
compensation, or change in job location. The enhanced severance for
vice-presidents is generally equal to two times the employee's annual salary
plus bonus, continuation of employee benefits and outplacement services.
41
<PAGE> 42
The Company has entered into an employment agreement with each Named Executive
Officer. Each of the agreements contain provisions for payment of a base salary
plus bonus, an automobile allowance and reimbursement of certain expenses
relating to relocating to Cedar Rapids, Iowa. In addition, pursuant to his
employment agreement, Mr. Hammer was granted options for 129,156 shares of
Common Stock vesting over a 55-month period beginning April 18, 1989. Mr. Hammer
is also entitled pursuant to his employment agreement to termination payments of
six months' salary, subject to certain exceptions.
The Company and Mr. Hammer are also parties to a Change in Control Benefit
Agreement pursuant to which Mr. Hammer is entitled to certain benefits in the
event of a change in control. Mr. Hammer may be entitled to accelerate up to
100,000 options upon the occurrence of a change in control, if such acceleration
does not have an adverse effect on the pooling-of-interest method of accounting.
The agreement provides that if it is determined that the accelerated vesting
upon a change in control of a stock option awarded to Mr. Hammer on September
24, 1996 would be subject to the excise tax imposed by section 4999 of the Code,
Mr. Hammer will be entitled to a tax-gross up payment in an amount equal to the
amount of the excise tax attributable to the accelerated vesting of the option,
taxes incurred by Mr. Hammer on the excise tax and any interest or penalties
incurred by Mr. Hammer with respect to such excise tax. Pursuant to the
Company's Long-Term Performance Program, Mr. Hammer was awarded 100,000 options
at an exercise price of $16.00 on September 24, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information with respect to the number of
shares of common stock beneficially owned by (i) each director of the Company,
(ii) the five executive officers of the Company named in the table under
"Compensation of Directors and Executive Officers -- Summary Compensation
Table," (iii) all directors and executive officers of the Company as a group and
(iv) based on information available to the Company and a review of statements
filed with the Commission pursuant to Section 13(d) and 13(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), each person that owns
beneficially (directly or together with affiliates) more than 5% of the Common
Stock, in each case as of November 8, 1996 (unless otherwise noted). The Company
believes that each individual or entity named has sole investment and voting
power with respect to shares of Common Stock indicated as beneficially owned by
them, except as otherwise noted.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY PERCENTAGE
NAME OWNED(1) OWNERSHIP(1)
- --------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
N. Robert Hammer(2).................................................. 286,509 3.74%
Keith B. Geeslin(3).................................................. 9,600 *
Charles G. Moore III(4).............................................. 18,382 *
Fred W. Wenninger(5)................................................. 7,665 *
Hatim A. Tyabji(6)................................................... 1,700 *
Scott D. Mercer(7)................................................... 5,139 *
Alan G. Bunte(8)..................................................... 25,842 *
John A. Niemzyk(9)................................................... 8,048 *
Thomas O. Miller(10)................................................. 36,880 *
All directors and executive officers as a group (11 persons)(11)..... 407,671 5.32%
Kopp Investment Advisors, Inc.(12)................................... 2,265,014 29.55%
</TABLE>
- -------------------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned
by such
42
<PAGE> 43
person, but not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) Includes 125,010 shares of Common Stock issuable upon exercise of options.
Also includes 1,566 shares of Common Stock owned by members of Mr. Hammer's
immediate family that may be deemed to be beneficially owned by Mr. Hammer.
(3) Includes 3,800 shares of Common Stock issuable upon exercise of options.
(4) Includes 8,800 shares of Common Stock issuable upon exercise of options.
(5) Includes 6,065 shares of Common Stock issuable upon exercise of options.
Also includes 100 shares of Common Stock held by Mr. Wenninger's wife that
may be deemed to be beneficially owned by Mr. Wenninger.
(6) Includes 1,700 shares of Common Stock issuable upon exercise of options.
(7) Includes 5,139 shares of Common Stock issuable upon exercise of options.
(8) Includes 21,700 shares of Common Stock issuable upon exercise of options.
(9) Includes 7,470 shares of Common Stock issuable upon exercise of options.
(10) Includes 26,748 shares of Common Stock issuable upon exercise of options.
(11) Includes 218,136 shares of Common Stock issuable upon exercise of options.
(12) Kopp Investment Advisors, Inc. ("Kopp") filed a Schedule 13G indicating
beneficial ownership of shares of Common Stock. According to the Schedule
13G and to information supplied to the Company by Kopp, (i) Kopp has shared
dispositive power with respect to 2,215,014 shares of Common Stock it
beneficially owns and sole dispositive power with respect to 50,000 shares
of Common Stock it beneficially owns and (ii) Kopp has sole voting power
with respect to 181,500 shares of Common Stock beneficially owned. The
number of shares beneficially owned by Kopp is indicated as of October 24,
1996. The address of Kopp is 6600 France Ave. S., #672, Edina, MN 55435.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of Norand and report are
included on pages 21 to 36 of this Form 10-K:
Report of Independent Public Accountants
Consolidated Balance Sheets -- August 31, 1996 and August 31, 1995
Consolidated Statements of Operations -- Fiscal Years ended August 31,
1996, August 31, 1995, and August 31, 1994
Consolidated Statements of Stockholders' Equity -- Fiscal Years ended
August 31, 1996, August 31, 1995, and August 31, 1994
Consolidated Statements of Cash Flows -- Fiscal Years ended August 31,
1996, August 31, 1995, and August 31, 1994
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
43
<PAGE> 44
The remaining statement schedules for which provision is made in Regulation S-X
are not required under the instructions contained therein, are inapplicable, or
the information is set forth in the consolidated financial statements or the
notes related thereto.
(a)(3) Exhibits
A list of the exhibits included as part of this Form 10-K is set forth in
the Exhibit Index that immediately precedes such exhibits, which is incorporated
herein by reference.
(b) Reports on Form 8-K
Norand did not file any Current Reports on Form 8-K in the fourth quarter
of its 1996 fiscal year.
44
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: November 27, 1996 NORAND CORPORATION
/s/ N. ROBERT HAMMER
--------------------------------------
N. Robert Hammer
Chairman, President, Chief Executive
Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
TITLE DATE
----------------------------------- -----------------
<C> <S> <C>
/s/ N. ROBERT HAMMER Chairman, President, Chief November 27, 1996
- ----------------------------------- Executive Officer and Director
N. Robert Hammer
/s/ ROBERT A. HURD Controller and Chief Accounting November 27, 1996
- ----------------------------------- Officer
Robert A. Hurd
/s/ KEITH B. GEESLIN Director November 27, 1996
- -----------------------------------
Keith B. Geeslin
/s/ CHARLES G. MOORE III Director November 27, 1996
- -----------------------------------
Charles G. Moore III
/s/ FRED W. WENNINGER Director November 27, 1996
- -----------------------------------
Fred W. Wenninger
/s/ HATIM A. TYABJI Director November 27, 1996
- -----------------------------------
Hatim A. Tyabji
</TABLE>
45
<PAGE> 46
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
- ----------- ------------------------------------------------------------------- ------------
<S> <C> <C>
2 Agreement of Merger, dated as of November 29, 1988, by and between
Norand Corporation, an Iowa corporation, and Norand Acquisition
Corporation (incorporated by reference to Exhibit 2 to the
Registrant's registration statement on Form S-1 dated April 10,
1992, File No. 33-47114)...........................................
3(a) Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3(b) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended February
27, 1993, File No. 0-20060)........................................
3(b) Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 3(d) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
4(a) Credit Agreement, dated as of February 1, 1993 by and among the
Registrant, certain financial institutions and The First National
Bank of Chicago (incorporated by reference to Exhibit 4(a) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1993, File No. 0-20060).................................
4(b) Amendment No. 1 to Credit Agreement, dated as of March 11, 1993, by
and among the Registrant, certain financial institutions and The
First National Bank of Chicago (incorporated by reference to
Exhibit 4(b) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1993, File No. 0-20060)...............
4(c) Amendment No. 2 to Credit Agreement, dated as of May 19, 1993, by
and among the Registrant, certain financial institutions and The
First National Bank of Chicago (incorporated by reference to
Exhibit 4(c) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1993, File No. 0-20060)...............
4(d) Amendment No. 3 to Credit Agreement, dated as of July 19, 1993, by
and among the Registrant, certain financial institutions and The
First National Bank of Chicago (incorporated by reference to
Exhibit 4(d) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1993, File No. 0-20060)...............
4(e) Amendment No. 4 to Credit Agreement, dated as of August 1, 1993, by
and among the Registrant, certain financial institutions and The
First National Bank of Chicago (incorporated by reference to
Exhibit 4(e) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1993, File No. 0-20060)...............
4(f) Amendment No. 5 to Credit Agreement, dated as of November 29, 1993,
by and among the Registrant, certain financial institutions and The
First National Bank of Chicago.....................................
4(g) Amendment No. 5 to Credit Agreement, dated as of November 29, 1993,
by and among the Registrant, certain financial institutions and The
First National Bank of Chicago (incorporated by reference to
Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended November 27, 1993, File No. 0-20060)......
4(h) Amended and Restated Credit Agreement (incorporated by reference to
Exhibit 4(h) to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended December 3, 1994, File No. 0-20060).......
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
- ----------- ------------------------------------------------------------------- ------------
<S> <C> <C>
4(i) Amendment No. 1 to the Amended and Restated Credit Agreement
(incorporated by reference to Exhibit 4(i) to the Registrant's
quarterly Report on Form 10-Q for the fiscal quarter ended June 3,
1995, File No. 0-20060)............................................
4(j) Amendment No. 2 to the Amended and Restated Credit Agreement.......
4(k) Amendment No. 3 to the Amended and Restated Credit Agreement.......
4(l) Second Amended and Restated Credit Agreement.......................
4(m) Amendment No. 1 to the Second Amended and Restated Credit Agreement
dated as of January 25, 1996.......................................
4(n)(1) Series A Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. A-1, dated November 20, 1996...........................
4(n)(2) Series A Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. A-2, dated November 20, 1996...........................
4(n)(3) Series A Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. A-3, dated November 20, 1996...........................
4(n)(4) Series A Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. A-4, dated November 20, 1996...........................
4(n)(5) Series A Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. A-5, dated November 20, 1996...........................
4(n)(6) Series B Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. B-1, dated November 20, 1996...........................
4(n)(7) Series B Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. B-2, dated November 20, 1996...........................
4(n)(8) Series B Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. B-3, dated November 20, 1996...........................
4(n)(9) Series B Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. B-4, dated November 20, 1996...........................
4(n)(10) Series B Warrant to Purchase Common Stock of Norand Corporation.
Warrant No. B-5, dated November 20, 1996...........................
9 Voting Trust Agreement, dated as of June 7, 1993, by and among
Sprout Capital V, Sprout Growth L.P., Sprout Growth Ltd., DLJ
Capital Corporation, DLJ Venture Capital Fund II, L.P., The Bank of
New York, as trustee, Donaldson, Lufkin & Jenrette, Inc. and The
Equitable Life Assurance Society of the United States (incorporated
by reference to Exhibit 9 to the Registrant's Annual Report on Form
10-K for the fiscal year ended August 31, 1994, File No.
0-20060)...........................................................
10(a) Nontransferable Option Agreement, dated as of April 1, 1992, by and
between the Registrant and N. Robert Hammer (incorporated by
reference to Exhibit 10(a) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
10(b) Nontransferable Incentive Stock Option Agreement, dated as of April
18, 1989, by and between the Registrant and N. Robert Hammer
(incorporated by reference to Exhibit 10(b) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(c) Nontransferable Non-Qualified Stock Option Agreement, dated as of
April 18, 1989, by and between the Registrant and Fred Wenninger
(incorporated by reference to Exhibit 10(c) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
- ----------- ------------------------------------------------------------------- ------------
<S> <C> <C>
10(d) Nontransferable Incentive Stock Option Agreement, dated as of April
12, 1989, by and between the Registrant and Robert F. Warn
(incorporated by reference to Exhibit 10(d) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(e) Nontransferable Incentive Stock Option Agreement, dated as of April
12, 1989, by and between the Registrant and Thomas O. Miller
(incorporated by reference to Exhibit 10(e) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(f) Nontransferable Incentive Stock Option Agreement, dated as of April
12, 1989, by and between the Registrant and Robert L. Koenig
(incorporated by reference to Exhibit 10(f) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(g) Nontransferable Incentive Stock Option Agreement, dated as of
January 1, 1992, by and between the Registrant and Greg L. Reyes
(incorporated by reference to Exhibit 10(g) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(h) Nontransferable Incentive Stock Option Agreement, dated as of April
12, 1989, by and between the Registrant and Gerald J. Sweas
(incorporated by reference to Exhibit 10(h) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(i) Nontransferable Incentive Stock Option Agreement, dated as of
January 20, 1992, by and between the Registrant and Gerald J. Sweas
(incorporated by reference to Exhibit 10(i) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(j) Nontransferable Incentive Stock Option Agreement, dated as of April
8, 1991, by and between the Registrant and Steven P. Flannery
(incorporated by reference to Exhibit 10(j) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(k) Registrant's Long-Term Performance Program (incorporated by
reference to Exhibit 10(k) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
10(l) Registrant's Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10(l) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
10(m) Registrant's Executive Bonus Plan (incorporated by reference to
Exhibit 10(m) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
10(n) Registrant's 1989 Stock Option Plan (incorporated by reference to
Exhibit 10(n) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
*10(o) License Agreement, dated December 1, 1991, by and between the
Registrant and Symbol Technologies, Inc. (incorporated by reference
to Exhibit 10(p) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
</TABLE>
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*10(p) Development Agreement, dated as of November 30, 1990, by and
between the Registrant and Omni-Point Data Company, Inc.
(incorporated by reference to Exhibit 10(q) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
*10(q) Original Equipment Manufacturer Agreement--ASICS, dated February
10, 1992, between the Registrant and Omnipoint Corporation
(incorporated by reference to Exhibit 10(r) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
*10(r) Norand Vendor Agreement, dated June 15, 1989, by and between the
Registrant and EMD Associates, Inc. (incorporated by reference to
Exhibit 10(s) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
*10(s) Motorola Product Sales Agreement, dated as of June 3, 1991, by and
between the Registrant and Motorola, Inc. (incorporated by
reference to Exhibit 10(u) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
10(t) Employment Letter Agreement, dated February 1, 1989, between the
Registrant and Gerald J. Sweas (incorporated by reference to
Exhibit 10(v) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
10(u) Employment Letter Agreement, dated July 29, 1991, between the
Registrant and Robert Warn (incorporated by reference to Exhibit
10(w) to the Registrant's registration statement on Form S-1 dated
April 10, 1992, File No. 33-47114).................................
10(v) Employment Letter Agreement, dated November 3, 1986, between Norand
Corporation and Tom Miller (incorporated by reference to Exhibit
10(x) to the Registrant's registration statement on Form S-1 dated
April 10, 1992, File No. 33-47114).................................
10(w) Employment Letter Agreement, dated September 30, 1987, between
Norand Corporation and Robert Koenig (incorporated by reference to
Exhibit 10(y) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
10(x) Employment Letter Agreement, dated April 1, 1989, between the
Registrant and N. Robert Hammer (incorporated by reference to
Exhibit 10(z) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
10(y) Employment Letter Agreement, dated December 13, 1991, between the
Registrant and N. Robert Hammer (incorporated by reference to
Exhibit 10(aa) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
10(z) Cedar Rapids Manufacturing Building Lease Agreement, dated October
13, 1983, by and between Norand Corporation and Alpha Development
Company (incorporated by reference to Exhibit 10(bb) to the
Registrant's registration statement on Form S-1 dated April 10,
1992, File No. 33-47114)...........................................
</TABLE>
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10(aa) Letter Agreement, dated October 27, 1983, between Norand
Corporation and Alpha Development Company regarding the Cedar
Rapids Manufacturing Building Lease Agreement (incorporated by
reference to Exhibit 10(cc) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
10(bb) Amended and Substituted First Amendment to Cedar Rapids
Manufacturing Building Lease Agreement, dated as of August ,
1984, by and between Norand Corporation and Alpha Development
Company (incorporated by reference to Exhibit 10(dd) to the
Registrant's registration statement on Form S-1 dated April 10,
1992, File No. 33-47114)...........................................
10(cc) Second Amendment to Cedar Rapids Manufacturing Building Lease
Agreement, dated as of June 20, 1986, by and between Norand
Corporation and Alpha Development Company (incorporated by
reference to Exhibit 10(ee) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
10(dd) Third Amendment to Cedar Rapids Manufacturing Building Lease
Agreement, dated as of December 26, 1990, by and between the
Registrant and Alpha Development Company (incorporated by reference
to Exhibit 10(ff) to the Registrant's registration statement on
Form S-1 dated April 10, 1992, File No. 33-47114)..................
10(ee) Cedar Rapids Service Center Lease Agreement, dated February 21,
1986, by and between Norand Corporation and Delta Partners
(incorporated by reference to Exhibit 10(gg) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(ff) Cedar Rapids Service Center Assignment of Lease, dated March 25,
1986, by and between the Norand Corporation, Delta Partners and
United States Bank (incorporated by reference to Exhibit 10(hh) to
the Registrant's registration statement on Form S-1 dated April 10,
1992, File No. 33-47114)...........................................
10(gg) Cedar Rapids Service Center Lease Modification and Extension
Agreement, dated May 7, 1991, by and between the Registrant and
Delta Partners (incorporated by reference to Exhibit 10(ii) to the
Registrant's registration statement on Form S-1 dated April 10,
1992, File No. 33-47114)...........................................
10(hh) Hiawatha, Iowa Warehouse Lease Agreement, dated June 21, 1991, by
and between the Registrant and Neprah Associates (incorporated by
reference to Exhibit 10(jj) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
*10(ii) Reseller Agreement, dated December 6, 1991, by and between the
Registrant and Epic Data, Inc. (incorporated by reference to
Exhibit 10(ll) to the Registrant's registration statement on Form
S-1 dated April 10, 1992, File No. 33-47114).......................
*10(jj) Letter of Intent, dated April 19, 1991, between the Registrant and
Seiko Epson Corporation (incorporated by reference to Exhibit
10(mm) to the Registrant's registration statement on Form S-1 dated
April 10, 1992, File No. 33-47114).................................
10(kk) Amendment No. 1 to Registrant's 1989 Stock Option Plan
(incorporated by reference to Exhibit 10(nn) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
</TABLE>
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*10(ll) International Distributor Agreement, dated September 1, 1992,
between the Registrant and Epson Hanbai Co., Ltd. (incorporated by
reference to Exhibit 10(oo) to the Registrant's registration
statement on Form S-1 dated April 10, 1992, File No. 33-47114).....
10(mm) Agreement, dated as of September 28, 1992, between the Registrant
and Pioneer Hi-Bred International, Inc. (incorporated by reference
to Exhibit 10(pp) to the Registrant's registration statement on
Form S-1 dated April 10, 1992, File No. 33-47114)..................
10(nn) Agreement, dated as of December 31, 1992, among the Registrant and
certain of its shareholders (incorporated by reference to Exhibit
10(rr) to the Registrant's registration statement on Form S-1 dated
April 10, 1992, File No. 33-47114).................................
10(oo) Amendment No. 2 to Registrant's 1989 Stock Option Plan
(incorporated by reference to Exhibit 10(ss) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(pp) Amendment No. 3 to Registrant's 1989 Stock Option Plan
(incorporated by reference to Exhibit 10(pp) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
10(qq) Nontransferable Incentive Stock Option Agreement, dated as of March
1, 1993, by and between the Registrant and N. Robert Hammer
(incorporated by reference to Exhibit 10(qq) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
10(rr) Incentive Stock Option Agreement, dated as of March 1, 1993, by and
between the Registrant and N. Robert Hammer (incorporated by
reference to Exhibit 10(rr) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993, File No.
0-20060)...........................................................
10(ss) Nontransferable Incentive Stock Option Agreement, dated as of March
1, 1993, by and between the Registrant and Gerald J. Sweas
(incorporated by reference to Exhibit 10(ss) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
10(tt) Incentive Stock Option Agreement, dated as of March 1, 1993, by and
between the Registrant and Gerald J. Sweas (incorporated by
reference to Exhibit 10(tt) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993, File No.
0-20060)...........................................................
10(uu) Nontransferable Incentive Stock Option Agreement, dated as of March
1, 1993, by and between the Registrant and Robert F. Warn
(incorporated by reference to Exhibit 10(uu) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
10(vv) Incentive Stock Option Agreement, dated as of March 1, 1993, by and
between the Registrant and Robert F. Warn (incorporated by
reference to Exhibit 10(vv) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993, File No.
0-20060)...........................................................
10(ww) Nontransferable Incentive Stock Option Agreement, dated as of March
1, 1993, by and between the Registrant and Robert L. Koenig
(incorporated by reference to Exhibit 10(ww) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
</TABLE>
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10(xx) Incentive Stock Option Agreement, dated as of March 1, 1993, by and
between the Registrant and Robert L. Koenig (incorporated by
reference to Exhibit 10(xx) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993, File No.
0-20060)...........................................................
10(yy) Nontransferable Incentive Stock Option Agreement, dated as of March
1, 1993, by and between the Registrant and Thomas O. Miller
(incorporated by reference to Exhibit 10(yy) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
10(zz) Incentive Stock Option Agreement, dated as of March 1, 1993, by and
between the Registrant and Thomas O. Miller (incorporated by
reference to Exhibit 10(zz) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993, File No.
0-20060)...........................................................
10(aaa) Employment Letter Agreement, dated December 3, 1991, between the
Registrant and Gregory L. Reyes (incorporated by reference to
Exhibit 10(aaa) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993, File No. 0-20060)...........
10(bbb) Executive Retention Bonus Agreement, dated December 11, 1991,
between the Registrant and Gregory L. Reyes (incorporated by
reference to Exhibit 10(bbb) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993, File No.
0-20060)...........................................................
10(ccc) Promissory Note, dated December 12, 1991, of Gregory L. Reyes,
payable to the Registrant (incorporated by reference to Exhibit
10(ccc) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1993, File No. 0-20060)...............
10(ddd) Stockholders' Agreement, dated as of October 1, 1992, between the
Registrant and certain of its stockholders (incorporated by
reference to Exhibit 10(ddd) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993, File No.
0-20060)...........................................................
10(eee) Waiver, Termination and Restriction Agreement, dated as of October
1, 1992, between the Registrant and certain of its stockholders
(incorporated by reference to Exhibit 9(b) to the Registrant's
registration statement on Form S-1 dated April 10, 1992, File No.
33-47114)..........................................................
10(fff) Amendment No. 1 to Registrant's Long-Term Performance Program
(incorporated by reference to Exhibit 10(fff) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
10(ggg) Letter Agreement, dated November 15, 1993, between the Registrant
and Epic Data, Inc., regarding the Reseller Agreement, dated
December 6, 1991, by and between the Registrant and Epic Data, Inc.
(incorporated by reference to Exhibit 10(ggg) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1993, File No. 0-20060)............................................
10(hhh) Cedar Rapids Manufacturing Building Amended and Restated Lease
Agreement, dated January 31, 1994, between Norand Corporation and
Alpha Development Company (incorporated by reference to Exhibit
10(hhh) to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended February 26, 1994, File No. 0-20060)..........
</TABLE>
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0-20060)...10(jjj) Incentive Stock Option Award Agreement dated December 15, 1993,
between Norand Corporation and Steven P. Flannery (incorporated by
reference to Exhibit 10(jjj) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1994, File No.
0-20060)...........................................................
10(kkk) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and N. Robert Hammer (incorporated by
reference to Exhibit 10(kkk) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(lll) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and Gerald J. Sweas (incorporated by
reference to Exhibit 10(lll) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(mmm) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and Thomas O. Miller (incorporated by
reference to Exhibit 10(mmm) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(nnn) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and Greg L. Reyes (incorporated by
reference to Exhibit 10(nnn) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 31, 1994, File No.
0-20060)...........................................................
10(ooo) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and Robert F. Warn (incorporated by
reference to Exhibit 10(ooo) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(ppp) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and Steven P. Flannery (incorporated by
reference to Exhibit 10(ppp) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(qqq) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and Robert L. Koenig (incorporated by
reference to Exhibit 10(qqq) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(rrr) Incentive Stock Option Award Agreement dated January 6, 1994,
between Norand Corporation and Robert A. Hurd (incorporated by
reference to Exhibit 10(rrr) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(sss) Incentive Stock Option Award Agreement dated February 24, 1994,
between Norand Corporation and Robert A. Hurd (incorporated by
reference to Exhibit 10(sss) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(ttt) Amendment No. 1 to Registrant's Employee Stock Purchase Plan
(incorporated by reference to Exhibit 4(a) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended November
27, 1993, File No. 0-20060)........................................
</TABLE>
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10(uuu) Amendment No. 2 to Registrant's Long-Term Performance Program
(incorporated by reference to Exhibit 4(b) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended November
27, 1993, File No. 0-20060)........................................
10(vvv) Hiawatha, Iowa Warehouse Lease Agreement dated May 16, 1994,
between the Registrant and Neprah Associates (incorporated by
reference to Exhibit 10(jj) to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended May 28, 1994, File No.
0-20060)...........................................................
10(www) Employment Letter Agreement, dated February 18, 1991, between the
Registrant and Steven P. Flannery (incorporated by reference to
Exhibit 10(www) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 31, 1994, File No. 0-20060)...........
10(xxx) Employment Letter Agreement, dated June 13, 1989, between the
Registrant and Robert A. Hurd (incorporated by reference to Exhibit
10(xxx) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1994, File No. 0-20060)...............
10(yyy) Cedar Rapids Product Development Center Lease Agreement, dated as
of April 6, 1994, between the Registrant and RYAN/D&S, L.C.
(incorporated by reference to Exhibit 10(yyy) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1994, File No. 0-20060)............................................
10(zzz) First Amendment to Cedar Rapids Product Development Center Lease,
dated as of July 6, 1994, between the Registrant and RYAN/D&S, L.C.
(incorporated by reference to Exhibit 10(zzz) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31,
1994, File No. 0-20060)............................................
10(aaaa) Registrants 1994 Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10(ttt) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended December
3, 1994, File No. 0-20060).........................................
10(bbbb) Non-Employee Director Stock Option Agreement between Norand
Corporation and Charles G. Moore, III dated March 15, 1995
(incorporated by reference to Exhibit 10(bbbb) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 4,
1955, File No. 0-20060)............................................
10(cccc) Non-Employee Director Stock Option Agreement between Norand
Corporation and Morton L. Topfer dated March 15, 1995 (incorporated
by reference to Exhibit 10(cccc) to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 4, 1995,
File No. 0-20060)..................................................
10(dddd) Non-Employee Director Stock Option Agreement between Norand
Corporation and Hatim Tyabji dated March 15, 1995 (incorporated by
reference to Exhibit 10(dddd) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 4, 1995, File No.
0-20060)...........................................................
10(eeee) Non-Employee Director Stock Option Agreement between Norand
Corporation and Fred W. Wenninger dated March 15, 1995
(incorporated by reference to Exhibit 10(eeee) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 4,
1995, File No. 0-20060)............................................
10(ffff) Non-Employee Director Stock Option Agreement between Norand
Corporation and Keith B. Geeslin dated March 15, 1995(incorporated
by reference to Exhibit 10(ffff) to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 4, 1995,
File No. 0-20060)..................................................
</TABLE>
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10(gggg) Incentive Stock Option Agreement between Norand Corporation and
Neil R. Hammer dated May 3, 1995 (incorporated by reference to
Exhibit 10(gggg) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 3, 1995, File No. 0-20060).......
10(hhhh) Incentive Stock Option Agreement between Norand Corporation and
Gerald S. Sweas dated May 3, 1995 (incorporated by reference to
Exhibit 10(hhhhh) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 3, 1995, File No. 0-20060).......
10(iiii) Incentive Stock Option Agreement between Norand Corporation and
Thomas O. Miller dated May 3, 1995 (incorporated by reference to
Exhibit 10(iiii) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 3, 1995, File No. 0-20060).......
10(jjjj) Form of Incentive Stock Option Agreement between Norand Corporation
and Robert F. Warn dated May 3, 1995 (incorporated by reference to
Exhibit 10(jjjj) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 3, 1995, File No. 0-20060).......
10(kkkk) Incentive Stock Option Agreement between Norand Corporation and
Steven P. Flannery dated May 3, 1995 (incorporated by reference to
Exhibit 10(kkkk) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 3, 1995, File No. 0-20060).......
10(llll) Incentive Stock Option Agreement between Norand Corporation and
Robert L. Koenig dated May 3, 1995 (incorporated by reference to
Exhibit 10(llll) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter end June 3, 1995, File No. 0-20060).........
10(mmmm) Incentive Stock Option Agreement between Norand Corporation and
Alan G. Bunte dated May 3, 1995 (incorporated by reference to
Exhibit 10(mmmm) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 3, 1995, File No. 0-20060).......
10(nnnn) Incentive Stock Option Agreement between Norand Corporation and
Robert A. Hurd dated May 3, 1995 (incorporated by reference to
Exhibit 10(nnnn) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 3, 1995, File No. 0-20060).......
10(oooo) Incentive Stock Option Agreement between Norand Corporation and
Robert F. Warn dated May 3, 1995 (incorporated by reference to
Exhibit 10(oooo) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 31, 1996, File No. 0-20060)...........
10(pppp) Non-Employee Director Stock Option Agreement between Norand
Corporation and Charles G. Moore, III dated January 18, 1996
(incorporated by reference to Exhibit 10(pppp) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 2,
1996, File No. 0-20060)............................................
10(qqqq) Non-Employee Director Stock Option Agreement between Norand
Corporation and Charles G. Moore, III dated March 16, 1996
(incorporated by reference to Exhibit 10(qqqq) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 2,
1996, File No. 0-20060)............................................
</TABLE>
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10(rrrr) Non-Employee Director Stock Option Agreement between Norand
Corporation and Hatim Tyabji dated March 16, 1996 (incorporated by
reference to Exhibit 10(rrrr) to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 2, 1996, File No.
0-20060)...........................................................
10(ssss) Non-Employee Director Stock Option Agreement between Norand
Corporation and Fred W. Wenninger dated March 16, 1996
(incorporated by reference to Exhibit 10(ssss) to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 2,
1996, File No. 0-20060)............................................
10(tttt) Non-Employee Director Stock Option Agreement between Norand
Corporation and Keith B. Geeslin dated March 16, 1996 (incorporated
by reference to Exhibit 10(tttt) to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 2, 1996,
File No. 0-20060)..................................................
10(uuuu) Incentive Stock Option Agreement dated March 29, 1996, between
Norand Corporation and Thomas O. Miller (incorporated by reference
to Exhibit 10(uuuu) to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 1, 1996, File No.
0-20060)...........................................................
10(vvvv) Incentive Stock Option Agreement dated February 6, 1996, between
Norand Corporation and Thomas O. Miller (incorporated by reference
to Exhibit 10(vvvv) to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 1, 1996, File No.
0-20060)...........................................................
10(wwww) Incentive Stock Option Agreement dated March 29, 1996, between
Norand Corporation and Robert A. Hurd (incorporated by reference to
Exhibit 10(wwww) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 1, 1996, File No. 0-20060).......
10(xxxx) Incentive Stock Option Agreement dated February 6, 1996, between
Norand Corporation and Robert A. Hurd (incorporated by reference to
Exhibit 10(xxxx) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 1, 1996, File No. 0-20060).......
10(yyyy) Incentive Stock Option Agreement dated January 25, 1996, between
Norand Corporation and John A. Niemzyk (incorporated by reference
to Exhibit 10(yyyy) to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 1, 1996, File No.
0-20060)...........................................................
10(zzzz) Incentive Stock Option Agreement dated March 29, 1996, between
Norand Corporation and John A. Niemzyk (incorporated by reference
to Exhibit 10(zzzz) to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 1, 1996, File No.
0-20060)...........................................................
10(aaaaa) Incentive Stock Option Agreement dated March 29, 1996, between
Norand Corporation and N. Robert Hammer (incorporated by reference
to Exhibit 10(aaaaa) to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 1, 1996, File No.
0-20060)...........................................................
10(bbbbb) Incentive Stock Option Agreement dated March 29, 1996, between
Norand Corporation and Alan G. Bunte (incorporated by reference to
Exhibit 10(bbbbb) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 1, 1996, File No. 0-20060).......
</TABLE>
56
<PAGE> 57
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
- ----------- ------------------------------------------------------------------- ------------
<S> <C> <C>
10(ccccc) Incentive Stock Option Agreement dated February 6, 1996, between
Norand Corporation and Alan G. Bunte (incorporated by reference to
Exhibit 10(ccccc) to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 1, 1996, File No. 0-20060).......
**10(ddddd) Incentive Stock Option Agreement dated September 24, 1996, between
Norand Corporation and N. Robert Hammer.
**10(eeeee) Norand Corporation Change in Control Severance Policy.
**10(fffff) Change in Control Benefit Agreement dated October 11, 1996 between
Norand Corporation and N. Robert Hammer.
11 Statement regarding computation of per share earnings..............
21 Subsidiaries of Norand.............................................
23 Consent of Arthur Andersen LLP.....................................
27 Financial data schedule............................................
</TABLE>
- -------------------------
* Confidential treatment has been obtained for portions of this exhibit
** Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
57
<PAGE> 1
EXHIBIT 4M
AMENDMENT NO. 1 TO THE SECOND AMENDED
AND RESTATED CREDIT AGREEMENT
Dated as of January 25, 1996
THIS AMENDMENT NO. 1 TO THE SECOND AMENDED AND RESTATED CREDIT
AGREEMENT ("Amendment") is delivered on November 20, 1996, to be effective as of
August 31, 1996, by and among NORAND CORPORATION (the "Borrower"), the
financial institutions listed on the signature pages hereof (the "Lenders") and
THE FIRST NATIONAL BANK OF CHICAGO, in its individual capacity as a Lender and
as contractual representative of the Lenders (the "Agent") under that certain
Second Amended and Restated Credit Agreement dated as of January 25, 1996 by
and among the Borrower, the Lenders and the Agent (the "Credit Agreement").
Defined terms used herein and not otherwise defined herein shall have the
meaning given to them in the Credit Agreement.
WITNESSETH
WHEREAS, the Borrower, the Lenders and the Agent are parties to the
Credit Agreement; and
WHEREAS, the Borrower, the Lenders and the Agent have agreed to amend
the Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, the Lenders and the Agent have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of August 31, 1996
and subject to the satisfaction of the conditions precedent set forth in Section
2 below, the Credit Agreement is hereby amended as follows:
1.1. Article I of the Credit Agreement is hereby amended as follows:
1.1.1. The definition of "Aggregate Commitment" is hereby amended to
delete the phrase ", and (v) for the period beginning on December 16, 1996
through the Facility Termination Date will be an amount equal to
$59,500,000" now occurring therein and to substitute the following
therefor:
", (v) for the period beginning on December 16, 1996 through March 30,
1997 will be an amount equal to $59,500,000, (vi) for the period
beginning on March 31, 1997 through May 30, 1997 will be an amount
equal to $57,000,000, (vii) for the period beginning on May 31, 1997
through June 29, 1997 will be an amount equal to $54,250,000, (viii)
for the period beginning on June 30, 1997 through July 30, 1997 will
be an amount equal to $53,250,000, (ix) for the period beginning on
July
<PAGE> 2
31, 1997 through August 30, 1997 will be an amount equal to
$52,250,000, (x) for the period beginning on August 31, 1997 through
September 14, 1997 will be an amount equal to $49,000,000, and (xi)
for the period beginning on September 15, 1997 through the Facility
Termination Date will be an amount equal to $48,250,000";
and to delete the phrase "(i), (ii), (iii), (iv) and (v)" now occurring
therein and substituting the following therefor: "(i) through (xi)".
1.1.2. The definition of "Aggregate Super Super Senior Commitment" is
hereby amended to insert at the end thereof, the following:
"; provided, that the Aggregate Super Super Senior Commitment shall be
permanently reduced to $0 on December 31, 1996"
1.1.3. The definition of "Alternate Base Rate" is hereby deleted in
its entirety and the following is substituted therefor:
"Alternate Base Rate" means, for any day, a rate of interest
per annum equal to the higher of (a) the Corporate Base Rate for such
day and (b) the sum of Federal Funds Effective Rate for such day plus
1/2% per annum.
1.1.4. The definition of "Facility Termination Date" is hereby deleted
in its entirety and the following is substituted therefor:
"Facility Termination Date" means September 30, 1997.
1.1.5. The definition of "Tangible Net Worth" is hereby deleted in its
entirety and the following is substituted therefor:
"Tangible Net Worth" means for any Person, at any date of
determination the consolidated stockholders' equity of such Person and
its Subsidiaries determined in accordance with Agreement Accounting
Principles, less their consolidated Intangible Assets, all determined
as of such date; provided, however, that prior to May 31, 1997 the
calculation of Tangible Net Worth with respect to the Borrower and its
Subsidiaries shall exclude $4,500,000 of stockholders' equity arising
from the issuance of the Settlement Stock.
1.1.6. The following definitions shall be added in alphabetical order:
"ABR Margin" means, with respect to any Loan, a rate per annum
determined for any day in accordance with the following table:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Revolving Super Super Super
Date Term Loans Loans Senior Loans Senior Loans
---------------------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Prior to 9/15/96 1.75% 1.75% 2.75% 2.75%
9/15/96 thru 10/14/96 2.25% 1.75% 2.75% 2.75%
10/15/96 thru 11/14/96 2.75% 1.75% 2.75% 2.75%
11/15/96 thru 12/14/96 3.25% 1.75% 2.75% 2.75%
12/15/96 thru 12/30/96 3.75% 1.75% 2.75% 2.75%
After 12/30/96 4.00% 4.00% 4.00% 4.00%
</TABLE>
"Amendment Delivery Date" means November 20, 1996.
"Settlement Stock" means the common stock of the Borrower
contemplated to be issued in settlement of pending shareholders'
claims against the Borrower with respect to the litigation styled In
re Norand Corporation Securities Litigation, Master File No. C95-323,
pending in the United States District Court for the Northern District
of Iowa, Cedar Rapids Division.
1.2. Section 2.2(b) of the Credit Agreement is hereby amended to
delete the first sentence thereof in its entirety and to substitute the
following therefor:
"The Borrower shall make ten (10) monthly amortization payments
reducing the principal balance of the Term Loans by $1,000,000 on
September 15, 1996, by $1,000,000 on October 15, 1996, by $1,000,000
on November 15, 1996, by $1,000,000 on December 15, 1996, by
$2,500,000 on March 31, 1997, by $2,750,000 on May 31, 1997, by
$1,000,000 on June 30, 1997, by $1,000,000 on July 31, 1997, by
$3,250,000 on August 31, 1997, and by $750,000 on September 15, 1997."
1.3. Section 2.3 of the Credit Agreement is hereby amended to insert
the following at the end thereof:
"(v) Restructuring Fees. (a) For the account of each Lender, a
restructuring fee equal to one-tenth of one percent (.10%) of such
Lender's Commitments payable on the Amendment Delivery Date. Such fee
shall be fully earned when due and shall be non-refundable when paid.
(b) For the account of each Lender, a restructuring fee equal to
(x) one-tenth of one percent (.10%) of such Lender's Commitments then
in effect on each of January 31, 1997, February 28, 1997, March 31,
1997, and April 30, 1997, and (y) one-quarter of one percent (.25%) of
such Lender's Commitments then in effect on June 30, 1997. Such fees
shall be fully earned on such dates and shall be due and payable on
the earlier of (A) June 30, 1997 or (B) the date on which the
Aggregate Commitment is terminated and all of the Obligations are
repaid in full. Such fees shall be non-refundable when paid."
-3-
<PAGE> 4
1.4. Section 2.14 of the Credit Agreement is hereby amended to delete
the last sentence thereof in its entirety and to substitute the following
therefor:
"The Borrower shall pay interest on each Loan at a rate per annum
equal to the sum of the Alternate Base Rate plus the ABR Margin
applicable to such Loan."
1.5. Section 6.4.1 of the Credit Agreement is hereby amended to
delete the phrase "or (iv) $1,000,000 during the period beginning December 1,
1996 and ending December 31, 1996" now contained therein, and to substitute the
following therefor:
"or (iv) $3,000,000 during the period beginning December 1, 1996
and ending February 28, 1997 or (v) $3,000,000 during the period
beginning March 1, 1997 and ending May 31, 1997 or (vi) $2,000,000
during the period beginning June 1, 1997 and ending August 31, 1997 or
(vii) $500,000 during the period beginning September 1, 1997 and
ending September 30, 1997; provided, however, that in the event that
the Borrower shall have received no less than $20,000,000 in net cash
proceeds of new equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption
terms of which equity capital shall be acceptable to the Required
Lenders) raised by and/or contributed to the Borrower subsequent to
the Amendment Delivery Date or of new Indebtedness subordinated to the
Obligations (all of the terms of which Indebtedness, including,
without limitation, maturity, amortization, covenants, defaults,
remedies and subordination provisions, shall be acceptable to the
Required Lenders) raised by the Borrower subsequent to the Amendment
Delivery Date, the amounts in subsections (v), (vi) and (vii) above
shall be increased to $3,750,000, $4,250,000 and $1,250,000,
respectively"
1.6. Section 6.4.2 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"6.4.2. Tangible Net Worth. The Borrower will maintain, as at
the last day of each fiscal quarter, (i) with respect to the fiscal
quarter ending August 31, 1996, a Tangible Net Worth of not less than
$28,000,000, (ii) with respect to the fiscal quarter ending November
30, 1996, a Tangible Net Worth of not less than $27,000,000, (iii)
with respect to the fiscal quarter ending February 28, 1997, a
Tangible Net Worth of not less than $28,000,000, (iv) with respect to
the fiscal quarter ending May 31, 1997, a Tangible Net Worth of not
less than $33,665,000, and (v) with respect to the fiscal quarter
ending August 31, 1997, a Tangible Net Worth of not less than
$36,549,000."
1.7. Section 6.4.3 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"6.4.3. Minimum EBITDA. The Borrower on a consolidated basis
with its Subsidiaries shall have EBITDA (i) for the period beginning
February 1, 1996 and
-4-
<PAGE> 5
ending May 31, 1996 of not less than $15,988,000, (ii) for the period
beginning February 1, 1996 and ending August 31, 1996 of not less than
$17,000,000, (iii) for the fiscal quarter ending on November 30, 1996
of not less than $3,705,000, (iv) for the fiscal quarter ending on
February 28, 1997 of not less than $5,044,000, (v) for the fiscal
quarter ending on May 31, 1997 of not less than $7,073,000, and (vi)
for the fiscal quarter ending August 31, 1997 of not less than
$8,564,000. Each of the amounts prescribed above in this Section
6.4.3 will be automatically reduced by the amount of any additional
restructuring charge or other expenses related to the Borrower's
restructuring over and above the restructuring charge or other
expenses related to the Borrower's restructuring of $5,121,000 (on a
pre-tax basis) currently budgeted for January, 1996 which additional
charge or expense is actually incurred or accrued subsequent to
January 1, 1996 but before February 29, 1996 and during the applicable
period in accordance with generally accepted accounting principles to
the extent such charges or other expenses related to the Borrower's
restructuring do not exceed in the aggregate for the period beginning
January 1, 1996 $2,800,000 (on an after-tax basis)."
1.8. Section 6.26 of the Credit Agreement is hereby amended to insert
at the end thereof, the following:
"The Borrower shall cause the consultant to issue monthly written
reports to the Agent and the Lenders, within 30 days after the end of
each month, describing in summary the Borrower's actions with respect
to refinancing the facilities hereunder, except to the extent any
information otherwise to be included in such report is prohibited
pursuant to a confidentiality agreement. On or before December 15,
1996, the Borrower shall cause the consultant to issue to the Agent
and the Lenders (i) a written report reviewing and reporting on the
Borrower's 1997 business plan as delivered to the Agent and the
Lenders on October 15, 1996, and (ii) a written report reviewing and
reporting on the Borrower's implementation of the consultant's
recommendations based on the consultant's review of the Borrower's
operations and controls in connection with the original execution and
delivery of this Agreement, including, without limitation, changes in
internal controls, changes in accounting controls and modifications
and restructuring of the Borrower's business. The Borrower shall
cause the consultant to issue to the Agent and the Lenders within
thirty (30) days after the close of each of the Borrower's fiscal
quarters a written report describing any differences of opinion
between the Borrower and the Borrower's independent certified public
accountants regarding the financial reporting of the Borrower,
including, without limitation, reporting of non-cash reserves."
1.9. Article VI of the Credit Agreement is hereby amended to add at
the end thereof a new Section 6.28 as follows:
"6.28. Norand Technology Corporation. The Borrower will not
permit Norand Technology Corporation (i) to engage in any operations
other than the ownership and licensing (as licensor) of patents and
other intellectual property in
-5-
<PAGE> 6
the ordinary course of business or (ii) to incur any Indebtedness or
liabilities, other than liabilities as licensor incidental to its
licensing agreements, liabilities incidental to its separate corporate
existence, and liabilities under the Loan Documents, provided that
Norand Technology Corporation may pay dividends and make distributions
to the Borrower."
1.10. Article VII of the Credit Agreement is hereby amended to add
immediately after the first sentence thereof the following:
"The Lenders and the Agent specifically waive any Defaults and
Unmatured Defaults resulting from the violation prior to the Amendment
Delivery Date of any provisions of Sections 6.4.1, 6.4.2 and 6.4.3
with respect to calculations made as of the end of Fiscal Year 1996."
2. Conditions of Effectiveness. This Amendment shall become
effective as of August 31, 1996, if, and only if, the Agent has received each of
the following:
(a) duly executed originals of this Amendment from the Borrower, the
Agent and each of the Lenders,
(b) duly executed originals of a Warrant Purchase Agreement from the
Borrower and the Lenders in form and substance acceptable to the Lenders,
(c) duly executed originals of warrants (the "Warrants") for the
purchase of an aggregate amount of 550,000 shares of common stock of the
Borrower in form and substance acceptable to the Lenders,
(d) a reaffirmation from Norand Technology Corporation, a Delaware
corporation, in form and substance acceptable to the Lenders,
(e) a certificate, signed by the Secretary or Assistant Secretary of
the Borrower, stating that there has been no change in the articles of
incorporation and by-laws of the Borrower since those delivered in
connection with the Credit Agreement or if there have been changes, setting
forth such changes,
(f) a certificate of good standing or qualification to do business of
recent date for the Borrower from the States of Iowa, Minnesota and
Delaware,
(g) copies, certified by the Secretary or Assistant Secretary of the
Borrower, of its Board of Directors' resolutions (and resolutions of other
bodies, if any are deemed necessary by counsel for any Lender) authorizing
the execution of this Amendment, the Notes and the Warrants and related
Warrant Purchase Agreement,
(h) an incumbency certificate, executed by the Secretary or Assistant
Secretary of the Borrower, which shall identify by name and title and bear
the signature of the officers of the Borrower authorized to sign the
Amendment, the Notes and the Warrants and to
-6-
<PAGE> 7
make borrowings hereunder, upon which certificate the Lenders shall be
entitled to rely until informed of any change in writing by the Borrower,
(i) written opinions of Mayer Brown & Platt, special counsel to the
Borrower and its Subsidiaries, and of James I. Johnson, General Counsel of
the Borrower, addressed to the Lenders in form and substance reasonably
acceptable to the Lenders,
(j) for the account of each Lender, a restructuring fee equal to
one-tenth of one percent (.10%) of such Lender's Commitments as in effect
on the date of delivery hereof, and
(k) such other documents, instruments and agreements as any Lender or
Sidley & Austin may reasonably request.
3. Representations and Warranties of the Borrower. The Borrower
hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Borrower and are
enforceable against the Borrower in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all representations and warranties made in the Credit Agreement, and
to the extent the same are not amended hereby, agrees that all such
representations and warranties shall be deemed to have been remade as of the
date of delivery of this Amendment, unless and to the extent that any such
representation and warranty is stated to relate solely to an earlier date, in
which case such representation and warranty shall be true and correct as of such
earlier date.
4. Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Credit Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) The Credit Agreement, as amended hereby, and all other documents,
instruments and agreements executed and/or delivered in connection therewith,
shall remain in full force and effect, and are hereby ratified and confirmed.
(c) Except as expressly provided herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Agent or the Lenders, nor constitute a waiver of any
provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws (as opposed to the conflict of law
provisions) of the State of Illinois.
-7-
<PAGE> 8
6. Headings. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more of
the parties to the Amendment on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
-8-
<PAGE> 9
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered on the date first above written.
NORAND CORPORATION
By: N. Robert Hammer
--------------------------------
Name: N. Robert Hammer
Title: Chairman, President
& Chief Executive Officer
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
By: Dennis Saletta
--------------------------------
Name: Dennis Saletta
Title: Vice President
LENDERS:
THE FIRST NATIONAL BANK OF
CHICAGO
By: Dennis Saletta
--------------------------------
Name: Dennis Saletta
Title: Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE
By: David Bouhl
--------------------------------
Name: David Bouhl, FVP
Title: Head of Corporate
Banking, Chicago
-9-
<PAGE> 10
FLEET NATIONAL BANK (f/k/a
Fleet Bank of Massachusetts, N.A.)
By: Bret Bokelkamp
-------------------------------
Name: Bret Bokelkamp
Title: Vice President
THE DAIWA BANK, LIMITED
By: Sumitomo Bank
By: Jun Okuda
-------------------------------
Name: Jun Okuda
Title: Attorney-In-Fact
NORWEST BANK IOWA, NATIONAL
ASSOCIATION
By: Robert A. Lawler
-------------------------------
Name: Robert A.Lawler
Title: Vice President
-10-
<PAGE> 1
EXHIBIT 4.N.1
================================================================================
SERIES A WARRANT
to Purchase Common Stock of
NORAND CORPORATION
================================================================================
Warrant No. A - 1
Original Issue
Date: November 20, 1996
<PAGE> 2
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE
TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY
TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR
RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE
PROPOSED TRANSFER.
Warrant No. A - 1
SERIES A WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT THE FIRST NATIONAL BANK OF CHICAGO, or registered
assigns, is entitled, at any time after May 31, 1997 and prior to the
Expiration Date (such term, and certain other capitalized terms used herein
being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware
corporation (the "Company"), Eighty-eight Thousand Eight Hundred Fifty-seven
(88,857) shares of the Common Stock of the Company (subject to adjustment as
provided herein), at a purchase price of $21.15 per share (the initial
"Exercise Price", subject to adjustment as provided herein), all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
<PAGE> 3
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any class
of voting stock of such Person and has the power to vote such shares or (c)
more than ten percent of the outstanding shares of any class of voting
stock (or, in the case of a Person which is not a corporation, more than
ten percent of the equity interest) of which is beneficially owned or held
by such Person and such Person has the power to vote such shares or equity
interest. The term "control" as used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate base
rate of interest announced by The First National Bank of Chicago from time
to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined by
an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and conditions
for the
-2-
<PAGE> 4
appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination of
Appraised Value shall be final and binding on the Company and all affected
holders of Warrants or Warrant Stock. Such Appraised Value shall be
determined as a pro rata portion of the value of the Company taken as a
whole, based on the higher of (A) the value derived from a hypothetical
sale of the entire Company as a going concern by a willing seller to a
willing buyer (neither acting under any compulsion) and (B) the liquidation
value of the entire Company. No discount shall be applied on account of
(i) any Warrants or Warrant Stock representing a minority interest, (ii)
any lack of liquidity of the Common Stock or the Warrants, (iii) the fact
that the Warrants or Warrant Stock may constitute "restricted securities"
for securities law purposes or (iv) the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of
Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
-3-
<PAGE> 5
class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.5 hereof) received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section
4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the Company
to comply in any material respect with any covenant of the Company
contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and available
for Transfers of Warrant Stock thereunder for the longer of either (i) any
ten consecutive Business Days, or (ii) an aggregate of fifteen Business
Days during the period specified in the relevant provision of Section 9
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable for,
with or without payment of additional consideration in cash or property,
shares of Common Stock, either immediately or upon the occurrence of a
specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the Lenders
party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the average
of the daily market prices of the Common Stock of the Company for the
shorter of (x) the twenty consecutive Business Days immediately preceding
such date or (y) the period commencing on the Business Day next following
the first public announcement of any event giving rise to an adjustment of
the Exercise Price pursuant to Section 4 below
-4-
<PAGE> 6
and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a National
Market System security, the last sale price, regular way, on such day on
the principal stock exchange or market system on which such Common Stock is
then listed or admitted to trading, or, if no such sale takes place on such
day, the average of the closing bid and asked prices for the Common Stock
on such day as reported on such stock exchange or market system or (ii) if
the Common Stock is not then listed or admitted to trading on any national
securities exchange or designated as a National Market System security on
NASDAQ but is traded over-the-counter, the average of the closing bid and
asked prices for the Common Stock as reported on NASDAQ or the Electronic
Bulletin Board or in the National Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section 9.2(a)
hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms of
which equity capital are acceptable to the Majority Warrant Holders) raised
by and/or contributed to the Company subsequent to the Original Issue Date
or new Indebtedness (as defined in the Credit Agreement) subordinated to
the Obligations (as defined in the Credit Agreement), provided the terms of
such Indebtedness (including, without limitation, maturity, amortization,
covenants, defaults, remedies and subordination provisions) are acceptable
to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
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"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at
any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to Section
4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under the
circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date shall
mean (A) if the Common Stock is publicly traded on such date, the Current
Market Price per share or (B) if the Common Stock is not publicly traded on
such date, (1) the fair market value per share of Common Stock as
determined in good faith by the Board of Directors of the Company and set
forth in a written notice to each Holder or (2) if the Majority Warrant
Holders object in writing to such price as determined by the Board of
Directors within thirty days after receiving notice of same, the Appraised
Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding on such date and all
shares of Common Stock issuable in respect of (x) the Warrants outstanding
on such date, (y) any Convertible Securities outstanding on such date and
(z) any other Stock Purchase Rights outstanding on such date, in each case
regardless of whether or not the conversion, exchange, subscription or
purchase rights associated with such Convertible Securities or Stock
Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or entailing
a finding, that the Company is insolvent or bankrupt, or seeking
reorganization, liquidation, dissolution, winding-up, charter revocation or
other similar relief with respect to the Company or any of its properties,
assets or debts, or seeking the appointment of a receiver, trustee,
custodian, liquidator, sequestrator or similar official for the Company or
any of its properties or assets, or the Company becoming insolvent or
bankrupt or generally unable to pay its debts as they become due, or the
Company voluntarily suspending its business or making a general assignment
for the benefit of creditors; provided that an Insolvency Event shall not
be deemed to have occurred on account of any such proceeding which is
involuntary on the part of the Company unless same shall not have been
dismissed or stayed within 60 days.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Uniform Commercial Code or
comparable law of any jurisdiction).
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"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with any
such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced in
Securities Act or bank regulatory matters, as the case may be, chosen by
the Holder of this Warrant or Warrant Stock issued upon the exercise hereof
and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any Subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock. "Outstanding",
when used with respect to Warrant Stock for the purposes of Section 9
hereof shall have the meaning set forth in Section 9.1(d) hereof.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, entity
or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration
or ordering by the Commission of effectiveness of such registration
statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Holders" shall mean, with respect to a specified registration
under Section 9 hereof, WS Holders whose Registrable Securities are
included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to Purchase
Common Stock of Norand Corporation, issued concurrently with, and having
the same terms (other than the number of shares purchasable upon the
exercise thereof) as, this Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to Purchase
Common Stock of Norand Corporation issued concurrently with this Warrant.
"Settlement Stock" shall mean the shares of Common Stock contemplated
to be issued in settlement of the pending shareholders' claims against the
Company with respect to the litigation styled In re Norand Corporation
Securities Litigation, Master File No. C95-323, pending in the United
States District Court for the Northern District of Iowa, Cedar Rapids
Division.
"Share Withholding Option" has the meaning set forth in Section 2.1(c)
hereof.
"Shelf Registration" shall have the meaning set forth in Section 9.2(a)
hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company of
Common Stock, Convertible Securities or Stock Purchase Rights after the
Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the
Warrants and any issuance of Common Stock, Convertible Securities or
Stock Purchase Rights (and
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any issuance of Common Stock pursuant to the conversion,
exchange or exercise of any such Convertible Securities or Stock
Purchase Rights) deemed to have been issued as of the Original Issue
Date pursuant to the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant (other
than warrants granted to Jay Alix and Associates and to Donald W.
Rowley for up to the respective number of shares set forth on Schedule
A) granted or issued after the Original Issue Date shall not be less
than the "daily market price" (as that term is defined in the
definition of Current Market Price) of the Common Stock on the date of
grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) The issuance of Common Stock or Convertible Securities
directly related to the Company's receipt of Equity if, and only if,
the aggregate Equity actually received by the Company between the
Original Issue Date and August 31, 1997 equals or exceeds $20 million
(otherwise, after August 31, 1997, all such issuances, both prior to
and after August 31, 1996, shall be considered a Subsequent Issuance
for purposes of Section 4 hereof).
(v) Any other issuance of Common Stock, Convertible Securities
or Stock Purchase Rights with respect to which the Majority Warrant
Holders shall have waived application of the provisions of Section 4
below.
"Subsidiary" means any corporation or association (a) more than 50% (by
number of votes) of the voting stock of which is at the time owned by the
Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries, or any other business entity in which the Company or one or
more Subsidiaries or the Company and one or more Subsidiaries own more than
a 50% interest either in the
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profits or capital of such business entity or (b) whose net earnings, or
portions thereof, are consolidated with the net earnings of the Company
and are recorded on the books of the Company for financial reporting
purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a "sale"
thereof within the meaning of the Securities Act.
"Triggering Event" shall mean the repayment in full of all indebtedness
under the Credit Agreement.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of
such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants
until such time as such shares of Common Stock have either been (i)
Transferred in a public offering pursuant to a registration statement filed
under the Securities Act or (ii) Transferred in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof with all transfer restrictions and restrictive
legends with respect to such Common Stock being removed in connection with
such transaction. "Warrant Stock", for the purposes of Section 9 hereof,
shall have the meaning set forth in Section 9.1(b) hereof.
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"WS Holder" shall have the meaning set forth in Section 9.1(a) hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after May 31, 1997 and
until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder
(as determined pursuant to Section 2.2 below). In order to exercise this
Warrant, in whole or in part, the Holder shall (i) deliver to the Company at
the Designated Office a written notice of the Holder's election to exercise
this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable
and specify the number of shares of Common Stock to be purchased, together with
this Warrant and (ii) pay to the Company the Warrant Price (the date on which
both such delivery and payment shall have first taken place being hereinafter
sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be
in the form of the subscription form appearing at the end of this Warrant as
Annex A, duly executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
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(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current Market Price equal to such Warrant Price or(iv) by delivery
of a Note, duly endorsed by or accompanied by appropriate instruments of
transfer duly executed by the Holder or by the Holder's attorney duly
authorized in writing. In the event of any withholding of Warrant Stock or
surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Current Market Price is equal to the Warrant Price is
not a whole number, the number of shares withheld by or surrendered to the
Company shall be rounded up to the nearest whole share and the Company shall
make a cash payment to the Holder based on the incremental fraction of a share
being so withheld by or surrendered to the Company in an amount determined in
accordance with Section 2.3 hereof. For the purpose of making payment of the
Warrant Price, any Note surrendered to the Company shall be deemed to have a
value equal to 100% of the principal amount thereof plus any interest accrued
but unpaid thereon. If the Holder delivers a Note with a deemed value that
exceeds the Warrant Price, the Company shall reissue to the Holder a new Note
identical in all respects to the surrendered Note except that the principal
amount of such new Note shall be equal to the principal amount that, together
with any interest accrued but unpaid thereon, is equal to the deemed value of
the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
the shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant. Such new Warrant shall in all other respects
be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassess-
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<PAGE> 16
able, issued without violation of any preemptive rights and free and clear of
all Liens (other than any created by actions of the Holder). The Company shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder and the Company shall reimburse
the Holder therefor on an After-Tax Basis.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request
of the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
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2.5. Limitation on Regulated Holder's Exercise. Notwithstanding
anything in this Warrant to the contrary, the Holder of this Warrant, if
subject to the Bank Holding Company Act or any provision of the Glass-Steagall
Act, may exercise this Warrant only if the Notice of Exercise is accompanied by
an Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such clearances would be obtained or
make it likely that such clearances would, if obtained, contain material
conditions adverse to such Holder. In the event that federal or state
regulatory clearances are required prior to the exercise of this Warrant by the
Holder hereof, the Company shall reasonably cooperate with such Holder in
providing such information to any regulatory agency as such agency may
reasonably require. In the event any such regulatory clearance is withheld or
denied, such Holder may continue to hold this Warrant until its expiration or
may sell or otherwise transfer this Warrant in accordance with the terms
hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
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3.2. Division and Combination. Subject to compliance with the
applicable provisions of this Warrant, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the Designated Office, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the applicable provisions of this Warrant as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its
own expense any new Warrant or Warrants required to be issued under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is
exercisable and the Exercise Price shall be subject to adjustment from time
to time as set forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time
the Company shall:
(i) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the
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number of shares of Common Stock Outstanding immediately prior to the
adjustment and the denominator of which is equal to the number of shares of
Common Stock Outstanding immediately after such adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If at any
time the Company shall issue or sell any shares of Common Stock in a Subsequent
Issuance for a consideration per share that is less than the Exercise Price in
effect immediately prior to such issuance or sale, then, forthwith upon such
issuance or sale, the Exercise Price shall be reduced to a price calculated by
dividing (1) an amount equal to the sum of (x) the number of shares of Common
Stock Outstanding immediately prior to such Subsequent Issuance multiplied by
the then existing Exercise Price, plus (y) the aggregate consideration
(determined in accordance with the provisions of Section 4.6 hereof), if any,
received by the Company in connection with such Subsequent Issuance, by (2) the
total number of shares of Common Stock Outstanding immediately after such
Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities.
(a) In the event that the Company shall at any time issue, sell or grant any
Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the
purpose of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock (without giving effect to any antidilution provisions in
such Stock Purchase Rights) that are or may become issuable upon exercise of
such Stock Purchase Rights (or upon exercise of any Convertible Securities
issuable upon exercise of such Stock Purchase Rights) for a consideration per
share equal to (i) the aggregate consideration per share (determined in
accordance with the provisions of Section 4.6 hereof) received by the Company
in connection with the issuance, sale or grant of such Stock Purchase Rights
plus (ii) the minimum
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amount of such consideration per share receivable by the
Company in connection with the exercise of such Stock Purchase Rights (and the
exercise of any Convertible Securities issuable upon exercise of such Stock
Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such Convertible Securities for a
consideration per share equal to (i) the aggregate consideration per share
(determined in accordance with the provisions of Section 4.6 hereof) received
by the Company in connection with the issuance or sale of such Convertible
Securities plus (ii) the minimum amount of such consideration per share
receivable by the Company in connection with the exercise of such conversion or
exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall
have been made hereunder as the result of any issuance, sale or grant of any
Stock Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall
have been made hereunder as the result of any issuance, sale or grant of any
Stock Purchase Rights or
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Convertible Securities, any of such Stock Purchase Rights or the rights of
conversion or exchange associated with such Convertible Securities shall expire
by their terms or any of such Stock Purchase Rights or Convertible Securities
shall be repurchased by the Company or a Subsidiary thereof for a consideration
per underlying share of Common Stock not exceeding the amount of such
consideration received by the Company in connection with the issuance, sale or
grant of such Stock Purchase Rights or Convertible Securities, the Exercise
Price then in effect shall forthwith be increased to the Exercise Price that
would have been in effect if such expiring Stock Purchase Rights or rights of
conversion or exchange or such repurchased Stock Purchase Rights or Convertible
Securities had never been issued. Similarly, if at any time after any such
adjustment of the Exercise Price shall have been made pursuant to Section 4.2
(i) any additional consideration is received or becomes receivable by the
Company in connection with the issuance or exercise of such Stock Purchase
Rights or Convertible Securities or (ii) there is a reduction in the conversion
ratio applicable to such Convertible Securities so that fewer shares of Common
Stock will be issuable upon the conversion or exchange thereof or there is a
decrease in the number of shares of Common Stock issuable upon exercise of such
Stock Purchase Rights, the Exercise Price then in effect shall be forthwith
readjusted to the Exercise Price that would have been in effect had such
changes taken place at the time that such Stock Purchase Rights or Convertible
Securities were initially issued, granted or sold. In no event shall any
readjustment under this Section 4.3(d) affect the validity of any shares of
Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment
of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such
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adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Holder of this Warrant shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In such event, the
aggregate Exercise Price otherwise payable for the shares of Common Stock
issuable upon exercise of this Warrant shall be allocated among the shares of
common stock and Other Property receivable as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modi-
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<PAGE> 23
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fications as may be reasonably deemed appropriate (as determined by resolution
of the Board of Directors of the Company) in order to provide for adjustments
of any shares of the common stock of such successor or acquiring corporation
for which this Warrant thus becomes exercisable, which modifications shall be
as equivalent as practicable to the adjustments provided for in this Section 4.
For purposes of this Section 4.5, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class that is not
preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. Determination of Consideration. For purposes of Sections 4.2,
4.3 and 4.4 hereof, the consideration received and/or receivable by the Company
in connection with the issuance, sale, grant or exercise of additional shares
of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective
of the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount received by
the Company after deduction of any accrued interest or dividends, expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Company.
(2) Securities or Other Property. In the case of securities or other
property, the fair market value thereof as of the date immediately
preceding such issuance, sale, grant or exercise as determined in good
faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares of
Common Stock are issued or sold together with other securities or other
assets of the Company for a consideration which covers both, the
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<PAGE> 24
consideration received (computed as provided in (1) and (2) above) shall be
allocable to such shares of Common Stock as determined in good faith by the
Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or Convertible
Securities shall be issued or sold together with other securities or other
assets of the Company, together comprising one integral transaction in
which no specific consideration is allocated to the Stock Purchase Rights
or Convertible Securities, the consideration allocable to such Stock
Purchase Rights or Convertible Securities shall be determined in good faith
by the Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company
payable in either case in Common Stock or Convertible Securities, such
Common Stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any shares of
Common Stock, Stock Purchase Rights or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor shall be
deemed to be the fair value on the date of issuance of such security of
such portion of the assets and business of the non-surviving corporation
attributable to such Common Stock, Stock Purchase Rights or Convertible
Securities, as is determined in good faith by the Company's Board of
Directors.
(7) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the
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<PAGE> 25
Majority Warrant Holders, and any dispute shall be resolved by an
investment banking or appraisal firm of recognized national standing
selected by the Company and reasonably acceptable to the Majority Warrant
Holders and whose decision shall be binding on the Company and all holders
of Warrants. The fees and expenses of such firm shall be paid by the party
or parties whose position is not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential intent and
principles hereof (including, without limitation, the issuance of securities
other than Common Stock which have the right to participate in distributions to
the holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
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<PAGE> 26
4.8. Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring such an adjustment shall occur. For the purpose of any such
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase Rights,
then all references in this Section 4 to the date of the issuance or sale
of such shares of Common Stock, Convertible Securities or Stock Purchase
Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution to which the provisions of Section 4.1
would apply, but shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously
made in respect thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1 above,
at no time shall the Exercise Price per share of Common Stock exceed the
amount set forth in the first paragraph of the preamble of this Warrant.
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<PAGE> 27
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock
to be less than the Exercise Price that would result from such transaction.
(g) Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is exercisable or the Exercise Price shall be
adjusted pursuant to this Section 4, the Company shall forthwith prepare a
certificate to be executed by the President or chief financial officer of
the Company setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated,
specifying the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.5)
describing the number and kind of any other shares of stock or Other
Property for which this Warrant is exercisable, and any related change in
the Exercise Price, after giving effect to such adjustment or change. The
Company shall promptly cause a signed copy of such certificate to be
delivered to each Holder in accordance with Section 15.2. The Company
shall keep at its principal office or at the Designated Office, if
different, copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective transferee of a Warrant designated by a Holder
thereof.
(h) Independent Application. Except as otherwise provided herein, all
subsections of this Section 4 are intended to operate independently of one
another (but without duplication). If an event occurs that requires the
application of more than one subsection, all applicable subsections shall
be given independent effect without duplication.
5. NO IMPAIRMENT
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<PAGE> 28
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or reasonably appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company shall take all such action as may be
necessary or reasonably appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all Liens, and shall use all
commercially reasonably efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all
times reserve and keep available for issuance upon the exercise of the Warrants
such number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or
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<PAGE> 29
(b) any amendment of the Certificate of Incorporation of the Company, the
Company shall mail to each Holder of a Warrant in accordance with the
provisions of Section 14.2 hereof a notice specifying the date or expected date
on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for the securities
or Other Property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer or disposition, and a
description in reasonable detail of the transaction. Such notice shall be
mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time,
exceptupon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares
of Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of
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Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion
of Counsel to the effect that such legend is not required for the purposes of
compliance with the Securities Act. Holders of the Warrants or the Restricted
Common Stock, as the case may be, shall not be entitled to Transfer such
Warrants or such Restricted Common Stock except in accordance with this Section
8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE
SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY
AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER
IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL
HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR
APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
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<PAGE> 31
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT
OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT
TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS
AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE
STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A)
SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED
SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN
SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT
THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE
ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE
SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company, at the expense of the
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Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN
SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE
OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the Holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series B Warrants and the holders
of Warrant Stock (as defined in Section 9.1(b)) are collectively referred
to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series B Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with respect
to such Common Stock being removed in connection with such transaction,(ii)
any other securities issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange by the Company generally
for, or in replacement by the Company generally
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of, any shares of Warrant Stock and (iii) any securities issued in
exchange for any such Warrant Stock in any merger or reorganization of the
Company, but in the cases of clauses (ii) and (iii) only so long as such
securities have not been registered and Transferred pursuant to the
Securities Act or Transferred in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act under Section
4(1) thereof so that all transfer restrictions and restrictive legends with
respect to such securities are removed in connection with such Transfer.
(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series B Warrants held by
such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed "outstanding"
as of a specified date will be equal to (i) the total number of shares of
Warrant Stock Outstanding as of such date plus (ii) the number of shares of
Warrant Stock issuable upon exercise of all outstanding Warrants and Series
B Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series B
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives at
any time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares
of Warrant Stock then outstanding (the "Demanding Holders") that the Company
file a registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for
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an offering on a delayed or continual basis pursuant to Rule 415 under the
Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration, the
Company shall:
(1) File the requested registration statement with the Commission as
promptly as practicable, and shall use all commercially reasonable efforts
to have the registration declared effective under the Securities Act as
soon as reasonably practicable, in each instance giving due regard to the
need to prepare and file current financial statements, conduct due
diligence and complete other actions that are reasonably necessary to
effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand Registration,
for up to 90 days or until such earlier date as of which all Registrable
Securities covered by such registration statement shall have been disposed
of in the manner described in the registration statement, and (y) if a
Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any
reason the effectiveness of a Demand Registration is suspended or postponed
as permitted by Subsection (d) below, the foregoing period shall be
extended by the aggregate number of days of such suspension or
postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not
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satisfied or waived, other than by reason of a failure on the part of the
Selling Holders. If the Company shall have complied with its obligations under
this Section 9, a right to demand a registration pursuant to this Section 9.2
shall be deemed to have been satisfied (i) if a Demand Registration other than
a Shelf Registration, upon the earlier of (x) the date as of which all of the
Registrable Securities included therein shall have been disposed of pursuant to
the registration statement and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of 90 days,
and (ii) if a Shelf Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or
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"all reasonable efforts" basis or otherwise), or an agented offering, the
Majority Selling Holders shall have the right to select the underwriter or
underwriters and manager or managers to administer such underwritten offering
or the placement agent or agents for such agented offering from among the
entities listed in Schedule B hereto (or any successors of any such entities),
it being understood that the Majority Selling Holders shall use commercially
reasonable efforts to select one or more of the first three listed entities
subject to arriving at reasonably acceptable terms and conditions for the
offering.
(f) The Company may elect to include shares of Common Stock to be sold
for its account in any such Demand Registration (including a Shelf
Registration); provided, however, if the managing underwriter shall advise the
Demanding Holders in writing (with a copy to the Company) that, in its opinion,
the number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be realized
therefor, or the timing thereof, then the number of shares proposed to be
included in such Demand Registration by the Company shall be reduced, to such
number that the Demanding Holders are advised can be sold without such effect
in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company
proposes to register (including for this purpose a registration effected by
the Company for shareholders of the Company other than the WS Holders) equity
securities under the Securities Act in connection with the public offering
solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor
forms), the Company shall promptly give each WS Holder written notice of such
registration (a "Piggyback Registration"). Upon the written request of each WS
Holder given within 20 days following the date of such notice, the Company
shall cause to be included in such registration statement and use its best
efforts to be registered under the Securities Act all the Registrable
Securities that each such WS Holder shall have requested to be registered. The
Company shall have the absolute right to withdraw or cease to prepare or file
any registration statement for any offering referred to in this Section 9.3
without any obligation or liability to any WS Holder.
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(b) If the managing underwriter shall advise the Company in writing
(with a copy to each Selling Holder) that, in its opinion, the amount of
Registrable Securities requested to be included in such registration would
materially adversely affect such offering, or the timing thereof, then the
Company will include in such registration, to the extent of the amount and
class which the Company is so advised can be sold without such material adverse
effect in such offering: first, all securities proposed to be sold by the
Company for its own account; and second, the Warrant Stock requested to be
included in such registration by WS Holders and all other securities requested
to be included in such registration by Persons other than the Company and WS
Holders, the securities covered by this clause second to be included pro rata
based on the estimated gross proceeds from the sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable
Securities included in an unlimited number of Piggyback Registrations pursuant
to this Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement with
respect to such Warrant Stock and use the Company's best efforts to cause
such registration statement to become effective; provided, however, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after
the initial filing of the registration statement and prior to effectiveness
thereof, the Company shall furnish to one firm of counsel for the Selling
Holders (selected by Majority Selling Holders) copies of all such documents
in the form substantially as proposed to be filed with the Commission at
least four Business Days prior to filing for review and comment by such
counsel, which opportunity to comment shall include an absolute right to
control or contest disclosure if the applicable Selling Holder reasonably
believes that it may be subject to controlling person liability under
applicable securities laws with respect thereto.
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(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with respect
to the disposition of all securities covered by such registration
statement. If the registration is for an underwritten offering, the
Company shall amend the registration statement or supplement the prospectus
whenever required by the terms of the underwriting agreement entered into
pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act,
if the registration statement is a Shelf Registration, the Company shall
amend the registration statement or supplement the prospectus so that it
will remain current and in compliance with the requirements of the
Securities Act for 270 days or after its effective date, and if during such
period any event or development occurs as a result of which the
registration statement or prospectus contains a misstatement 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, the Company shall
promptly notify each Selling Holder, amend the registration statement or
supplement the prospectus so that each will thereafter comply with the
Securities Act and furnish to each Selling Holder of Registrable Securities
such amended or supplemented prospectus, which each such Holder shall
thereafter use in the Transfer of Warrant Stock covered by such
registration statement. Pending such amendment or supplement each such
Selling Holder shall cease making offers or Transfers of Registerable
Securities pursuant to the prior prospectus. In the event that any
Registrable Securities included in a registration statement subject to, or
required by, this Warrant remain unsold at the end of the period during
which the Company is obligated to use its best efforts to maintain the
effectiveness of such registration statement, the Company may file a
post-effective amendment to the registration statement for the purpose of
removing such Registrable Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities, without
charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each
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preliminary prospectus and any amendments or supplements thereto, in
each case in conformity with the requirements of the Securities Act and the
rules thereunder, and such other related documents as any such Selling
Holder may reasonably request in order to facilitate the disposition of
Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such states or jurisdictions as shall be
reasonably requested by the managing underwriter (as applicable, or if
inapplicable, the Majority Selling Holders), and (ii) to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or
exemption from qualification) of the offer and transfer of any of the
Registrable Securities in any jurisdiction, at the earliest possible
moment; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not be
required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and take
all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
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(g) Make generally available to the Company's security holders copies
of all periodic reports, proxy statements, and other information referred
to in Section 9.9(a) and an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 90 days following the end
of the 12-month period beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of each
registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and underwriter (but not more than one firm of counsel to
such Selling Holders), all financial and other information as shall be
reasonably requested by them, and provide the Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and underwriter the opportunity to discuss the business
affairs of the Company with its principal executives and independent public
accountants who have certified the audited financial statements included in
such registration statement, in each case all as necessary to enable them
to exercise their due diligence responsibility under the Securities Act;
provided, however, that information that the Company determines, in good
faith, to be confidential and which the Company advises such Person in
writing, is confidential shall not be disclosed unless such Person signs a
confidentiality agreement reasonably satisfactory to the Company or the
related Selling Holder of Registrable Securities agrees to be responsible
for such Person's breach of confidentiality on terms reasonably
satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of the
type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company shall
furnish to each Selling Holder a signed counterpart of any such comfort
letter or legal opinion. Delivery of any such opinion or comfort letter
shall be subject to the recipient furnishing such written representations
or acknowledgments as are customarily
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provided by selling shareholders who receive such comfort letters or
opinions.
(j) Provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a recognized
trading market, to continue to be so listed or included for a reasonable
period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations
of the Company to enable the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number for
the Common Stock prior to the effective date of the first registration
statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
this Section 9 with respect to the Registrable Securities of any Selling Holder
that such Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Selling Holder's Registrable Securities, and to
cooperate with the Company in preparing such registration; and
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(ii) Agree to sell their Registrable Securities to the underwriters at
the same price and on substantially the same terms and conditions as the
Company or the other Persons on whose behalf the registration statement was
being filed have agreed to sell their securities, and to execute the
underwriting agreement agreed to by the Majority Selling Holders (in the
case of a registration under Section 9.2) or the Company and the Majority
Selling Holders (in the case of a registration under Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of such
Selling Holder's shares registered for sale pursuant to this Section 9;
provided, however, it is understood that any failure so to notify the
Company shall not be deemed a default hereunder or to subject any Selling
Holder to any claim for damages or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all fees
and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the Company,
and of the Company's independent public accountants, including the expenses
of "cold comfort" letters required by or incident to such performance and
compliance, and the reasonable fees and disbursements of one firm of
counsel for the Selling Holders of Registrable Securities (the
"Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the Company
shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense),
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unless WS Holders whose Registrable Securities constitutes a majority of
the Registrable Securities then outstanding agree that such withdrawn
registration shall constitute the exercise of their one demand registration
under Section 9.2 hereof. The counsel for the Selling Holders shall be
selected by Demanding Holders owning a majority of the Registrable
Securities owned by Demanding Holders to be included in a Demand
Registration and, in the case of a Piggyback Registration, by Selling
Holders owning a majority of the Registrable Securities to be included in
such registration; provided that in the case of a Piggyback Registration,
the Selling Holders shall use one firm of counsel to represent all such
holders and shall endeavor in good faith, with any other holders of
securities to be included in such registration, to select one firm of
counsel to represent all such selling securities holders.
(b) The Company shall bear and pay all Registration Expenses incurred
in connection with any Piggyback Registrations pursuant to Section 9.3 for
each Selling Holder, but excluding underwriting discounts and commissions
relating to Registrable Securities (which shall be paid on a pro rata
basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, and
each officer, director, partner, and employee of such Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may
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become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages, liabilities
and expenses arise out of or are based upon any of the following
statements, omissions or violations pursuant to a final non-appealable
order (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any
amendments or supplements thereto;
(ii) 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; or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any applicable state securities law
or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any applicable state securities law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such
loss, claim, damage, liability or expense to the extent that it is
determined by a court of competent jurisdiction by a final non-appealable
order to have solely arisen out of or be based upon a Violation which
occurred in reliance upon and in conformity with written information
furnished to the Company by the indemnified party expressly for use in
connection with such registration; provided, further, that the indemnity
agreement contained in this Section 9.7(a) shall not apply to any
underwriter to the extent that any such loss is based on or arises out of
an untrue statement or alleged untrue statement of a material fact, or an
omission or alleged omission to state a material fact, contained in or
omitted from any preliminary prospectus if the final prospectus shall
correct such untrue statement or
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alleged untrue statement, or such omission or alleged omission, and a
copy of the final prospectus has not been sent or given to such person at
or prior to the confirmation of sale to such person if such underwriter was
under an obligation to deliver such final prospectus and failed to do so.
The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each
person who controls such persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Selling Holders.
(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors, each
of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling Holder,
any controlling Person of any such other Selling Holder and each officer,
director, partner, and employee of such other Selling Holder and such
controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other federal
or state laws, insofar as such losses, claims, damages, liabilities and
expenses are determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation that occurred in reliance upon and in conformity with written
information furnished by such Selling Holder expressly for use in
connection with such registration; provided, however, that (x) the
indemnification required by this Section 9.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or expense if
settlement is effected without the consent of the relevant Selling Holder
of Registrable Securities, which consent shall not be unreasonably
withheld, and (y) in no event shall the amount of any indemnity under this
Section 9.7(b) exceed the net
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proceeds from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this Section
9.7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified
party may make a claim under this Section 9.7, such indemnified party shall
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that
an indemnified party shall have the right to retain its own counsel, with
the fees and disbursements and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time following
the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability
to the indemnified party under this Section 9.7 but shall not relieve the
indemnifying party of any liability that it may have to any indemnified
party otherwise than pursuant to this Section 9.7. Any reasonable fees and
expenses incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such
action or proceeding) shall be paid to the indemnified party, as incurred,
within thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such indemnified
party shall have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be the expenses of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees and
expenses or (ii) the indemnifying party shall have failed to promptly
assume the
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defense of such action, claim or proceeding or (iii) the named parties
to any such action, claim or proceeding (including any impleaded parties)
include both such indemnified party and the indemnifying party, and such
indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the
assertion of such defenses would create a conflict of interest such that
counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies
the indemnifying party in writing that it elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not
have the right to assume the defense of such action, claim or proceeding on
behalf of such indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action, claim
or proceeding or separate but substantially similar or related actions,
claims or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties,
unless in the reasonable judgment of such indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such action, claim or proceeding, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels). No indemnifying party
shall be liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute
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to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether any
Violation has been committed by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such Violation. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 9.7(a) and Section 9.7(b), any
reasonable legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault of
such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and
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when bills are received or expense, loss, damage or liability is
incurred. In the event that it shall be subsequently determined that the
recipient of any such periodic payment shall not be entitled to
indemnification hereunder, such recipient promptly shall repay such
payments, together with interest thereon at the Agreed Rate from the date
of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the completion
of any offering of Registrable Securities pursuant to a registration
statement under this Section 9, and otherwise.
9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to
have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities
or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or agented
registration), during the 5-day period prior to, and during the 45-day period
beginning on, the date such registration statement is declared effective under
the Securities Act by the Commission, provided that such WS Holder is timely
notified of such effective date in writing by the Company or such managing
underwriter.
9.9. Additional Covenants of the Company. The Company hereby agrees
and covenants as follows:
(a) The Company shall file as and when applicable, on a timely basis,
all reports required to be filed by it under the Exchange Act. If the
Company is not required to file reports pursuant to the Exchange Act, upon
the request of any WS Holder, the Company shall make publicly available the
information specified in subparagraph (c)(2) of Rule 144 of the Securities
Act, and take such further action as may be reasonably required from time
to time and as may be within the reasonable control of the Company, to
enable the WS Holders to Transfer Warrants or Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the
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Securities Act or any similar rule or regulation hereafter adopted by the
Commission. In addition, promptly upon the request of any WS Holder, the
Company shall provide such WS Holder with such publicly available financial
statements, reports and other information as may be required to permit such
WS Holder to Transfer shares of Registrable Securities to Qualified
Institutional Investors pursuant to Rule 144A of the Securities Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Common Stock, Convertible Securities or Stock Purchase Rights during the 5
Business Days prior to, and during the 90-day period beginning on, the
commencement of a public distribution of Registrable Securities pursuant to
any registration statement prepared pursuant to this Section 9 (other than
by the Company pursuant to such registration if the registration is
pursuant to Section 9.3 or by the Company pursuant to any dividend
reinvestment plan offered by it to its stockholders). The Company shall
not effect any registration of its securities (other than on Form S-4, Form
S-8, or any successor forms to such forms or pursuant to such other
registration rights agreements as may be approved in writing by the
Majority Selling Holders) or effect any public or private sale or
distribution of any of its securities, including a sale pursuant to
Regulation D under the Securities Act, whether on its own behalf or at the
request of any holder or holders of such securities from the date of a
request for a Demand Registration pursuant to Section 9.2 until 90 days
following the effective date of such Demand Registration statement, unless
the Company shall have previously notified in writing all Selling Holders
of the Company's desire to do so, and the Majority Selling Holders or the
managing underwriter, if any, shall have consented thereto in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant to
which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or other
agreement) shall contain a provision whereby any holder receiving such
Common Stock who will hold more than one
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percent (1%) of the amount of such Common Stock then outstanding shall
agree not to effect any public sale or distribution of any such Common
Stock during the periods described in the second sentence of Section
9.9(b), in each case including a sale pursuant to Rule 144 under the
Securities Act (unless such Person is prevented by applicable statute or
regulation from entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer or
agree to Transfer all or substantially all the Company's assets, unless
prior to such merger, consolidation, reorganization or asset Transfer, the
surviving corporation or the Transferee, respectively, shall have agreed in
writing to assume the obligations of the Company under this Agreement, and
for that purpose references hereunder to "Registrable Securities" shall be
deemed to include the securities which the WS Holders would be entitled to
receive in exchange for Registrable Securities pursuant to any such merger,
consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of The First National Bank of Chicago shall be a sufficient indemnity)
and, in case of mutilation, upon surrender and cancellation hereof, the Company
will execute and deliver in lieu hereof a new Warrant of like tenor to such
Holder; provided, however, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
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As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular and periodic
reports, proxy statements (other than preliminary) and registration
statements (other than registration statements on Forms S-3 (relating to
debt securities) and S-8) which the Company may file with the Securities
and Exchange Commission or any governmental agency substituted therefor.
(ii) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available by
the Company to the holders of any class of its securities generally or by
any Subsidiary of the Company to the holders of any class of its securities
generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
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13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice (the
"Call Notice") to the Holders of all outstanding Warrants given at any time on
or after the date of the occurrence of the Triggering Event and before May 31,
1997, to repurchase on the date specified in the notice from each Holder of a
Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series A Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series A Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender of
this Warrant at the Designated Office against payment of the repurchase price
therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or communication hereunder to be made pursuant
to the provisions of this Warrant shall be sufficiently given or made if in
writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
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<PAGE> 54
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss, cost,
damage, reasonable attorneys' and accountants' fees and expenses, court costs
and all other out-of-pocket expenses incurred in connection with or arising
from a Company Default. This indemnification provision shall be in addition to
the rights of such Holder or Holders to bring an action against the Company for
breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this War-
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<PAGE> 55
rant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provisions of Sections
3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and, in the case of Section 9, all Holders of shares of Warrant
Stock issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
14.7. Amendment. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and the Majority Warrant Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may
be purchased upon exercise of such Warrant (before giving effect to any
adjustment as provided therein) without the written consent of the Holder
thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND
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<PAGE> 56
PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS
SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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<PAGE> 57
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By: N. Robert Hammer
--------------------------------
Name: N. Robert Hammer
Title: Chairman, President and
Chief Executive Officer
[SEAL]
Attest:
By: James I. Johnson
--------------------------------------
Name: James I. Johnson
Title: Secretary and General Counsel
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<PAGE> 58
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 59
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 60
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 14
3.1. Transfer14
3.2. Division and Combination. 14
3.3. Expenses. 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and
Convertible Securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under
this Section 21
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions 23
7.2 Closing of Transfer Books 23
8. TRANSFER RESTRICTIONS 24
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 61
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures 30
9.5. Selling Holders' Obligations 34
9.6. Expenses of Registration 34
9.7. Indemnification; Contribution 35
9.8. Holdback. 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment. 45
14.8. Severability 45
14.9. Headings. 45
14.10. GOVERNING LAW; JURISDICTION 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
SCHEDULE B UNDERWRITERS AND AGENTS
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<PAGE> 62
-iii-
<PAGE> 1
EXHIBIT 4.N.2
SERIES A WARRANT
to Purchase Common Stock of
NORAND CORPORATION
Warrant No. A - 2
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 14
3.1. Transfer 14
3.2. Division and Combination 14
3.3. Expenses 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and Convertible Securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under this Section 21
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions 23
7.2 Closing of Transfer Books 23
8. TRANSFER RESTRICTIONS 24
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures 30
9.5. Selling Holders' Obligations 34
9.6. Expenses of Registration 34
9.7. Indemnification; Contribution 35
9.8. Holdback 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment 45
14.8. Severability 45
14.9. Headings 45
14.10. GOVERNING LAW; JURISDICTION 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
SCHEDULE B UNDERWRITERS AND AGENTS
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<PAGE> 4
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO
BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF
COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO
THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO
RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE
DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR
APPLYING SUCH RULE TO THE PROPOSED TRANSFER.
Warrant No. A - 2
SERIES A WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT CAISSE NATIONALE DE CREDIT AGRICOLE, or registered
assigns, is entitled, at any time after May 31, 1997 and prior to the
Expiration Date (such term, and certain other capitalized terms used herein
being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware
corporation (the "Company"), Fifty-Seven Thousand Five Hundred Ninety-seven
(57,597) shares of the Common Stock of the Company (subject to adjustment as
provided herein), at a purchase price of $21.15 per share (the initial
"Exercise Price", subject to adjustment as provided herein), all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
<PAGE> 5
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings
set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any
class of voting stock of such Person and has the power to vote such
shares or (c) more than ten percent of the outstanding shares of any
class of voting stock (or, in the case of a Person which is not a
corporation, more than ten percent of the equity interest) of which is
beneficially owned or held by such Person and such Person has the power
to vote such shares or equity interest. The term "control" as used with
respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate
base rate of interest announced by The First National Bank of Chicago
from time to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined
by an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and
conditions for the
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<PAGE> 6
appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination
of Appraised Value shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company
taken as a whole, based on the higher of (A) the value derived from a
hypothetical sale of the entire Company as a going concern by a willing
seller to a willing buyer (neither acting under any compulsion) and (B)
the liquidation value of the entire Company. No discount shall be
applied on account of (i) any Warrants or Warrant Stock representing a
minority interest, (ii) any lack of liquidity of the Common Stock or the
Warrants, (iii) the fact that the Warrants or Warrant Stock may
constitute "restricted securities" for securities law purposes or (iv)
the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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<PAGE> 7
class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.5 hereof) received by or distributed to the holders
of Common Stock of the Company in the circumstances contemplated by
Section 4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the
Company to comply in any material respect with any covenant of the
Company contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and
available for Transfers of Warrant Stock thereunder for the longer of
either (i) any ten consecutive Business Days, or (ii) an aggregate of
fifteen Business Days during the period specified in the relevant
provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or
exchangeable for, with or without payment of additional consideration in
cash or property, shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the
Lenders party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for
the shorter of (x) the twenty consecutive Business Days immediately
preceding such date or (y) the period commencing on the Business Day next
following the first public announcement of any event giving rise to an
adjustment of the Exercise Price pursuant to Section 4 below
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<PAGE> 8
and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a
National Market System security, the last sale price, regular way, on
such day on the principal stock exchange or market system on which such
Common Stock is then listed or admitted to trading, or, if no such sale
takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day as reported on such stock exchange or
market system or (ii) if the Common Stock is not then listed or admitted
to trading on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter,
the average of the closing bid and asked prices for the Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National
Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section
9.2(a) hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms
of which equity capital are acceptable to the Majority Warrant Holders)
raised by and/or contributed to the Company subsequent to the Original
Issue Date or new Indebtedness (as defined in the Credit Agreement)
subordinated to the Obligations (as defined in the Credit Agreement),
provided the terms of such Indebtedness (including, without limitation,
maturity, amortization, covenants, defaults, remedies and subordination
provisions) are acceptable to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time
to time.
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<PAGE> 9
"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to
Section 4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under
the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date
shall mean (A) if the Common Stock is publicly traded on such date, the
Current Market Price per share or (B) if the Common Stock is not publicly
traded on such date, (1) the fair market value per share of Common Stock
as determined in good faith by the Board of Directors of the Company and
set forth in a written notice to each Holder or (2) if the Majority
Warrant Holders object in writing to such price as determined by the
Board of Directors within thirty days after receiving notice of same, the
Appraised Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to
be determined, all shares of Common Stock Outstanding on such date and
all shares of Common Stock issuable in respect of (x) the Warrants
outstanding on such date, (y) any Convertible Securities outstanding on
such date and (z) any other Stock Purchase Rights outstanding on such
date, in each case regardless of whether or not the conversion, exchange,
subscription or purchase rights associated with such Convertible
Securities or Stock Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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<PAGE> 10
"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or
entailing a finding, that the Company is insolvent or bankrupt, or
seeking reorganization, liquidation, dissolution, winding-up, charter
revocation or other similar relief with respect to the Company or any of
its properties, assets or debts, or seeking the appointment of a
receiver, trustee, custodian, liquidator, sequestrator or similar
official for the Company or any of its properties or assets, or the
Company becoming insolvent or bankrupt or generally unable to pay its
debts as they become due, or the Company voluntarily suspending its
business or making a general assignment for the benefit of creditors;
provided that an Insolvency Event shall not be deemed to have occurred on
account of any such proceeding which is involuntary on the part of the
Company unless same shall not have been dismissed or stayed within 60
days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement perfecting a security interest under the
Uniform Commercial Code or comparable law of any jurisdiction).
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<PAGE> 11
"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock
(with any such Warrants being deemed to represent, for the purposes of
such calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced
in Securities Act or bank regulatory matters, as the case may be, chosen
by the Holder of this Warrant or Warrant Stock issued upon the exercise
hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary thereof, and shall
include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Outstanding", when used with respect to Warrant Stock for the purposes
of Section 9 hereof shall have the meaning set forth in Section 9.1(d)
hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state,
county, city, municipal or otherwise, including, without limitation,
any instrumentality, division, agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth
in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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<PAGE> 13
"Selling Holders" shall mean, with respect to a specified
registration under Section 9 hereof, WS Holders whose Registrable
Securities are included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with,
and having the same terms (other than the number of shares purchasable
upon the exercise thereof) as, this Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with this
Warrant.
"Settlement Stock" shall mean the shares of Common Stock
contemplated to be issued in settlement of the pending shareholders'
claims against the Company with respect to the litigation styled In re
Norand Corporation Securities Litigation, Master File No. C95-323,
pending in the United States District Court for the Northern District of
Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in Section
2.1(c) hereof.
"Shelf Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after
the Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the
Warrants and any issuance of Common Stock, Convertible Securities
or Stock Purchase Rights (and
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<PAGE> 14
any issuance of Common Stock pursuant to the conversion,
exchange or exercise of any such Convertible Securities or Stock
Purchase Rights) deemed to have been issued as of the Original
Issue Date pursuant to the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant
(other than warrants granted to Jay Alix and Associates and to
Donald W. Rowley for up to the respective number of shares set
forth on Schedule A) granted or issued after the Original Issue
Date shall not be less than the "daily market price" (as that term
is defined in the definition of Current Market Price) of the Common
Stock on the date of grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) The issuance of Common Stock or Convertible Securities
directly related to the Company's receipt of Equity if, and only
if, the aggregate Equity actually received by the Company between
the Original Issue Date and August 31, 1997 equals or exceeds $20
million (otherwise, after August 31, 1997, all such issuances, both
prior to and after August 31, 1996, shall be considered a
Subsequent Issuance for purposes of Section 4 hereof).
(v) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights with respect to which the
Majority Warrant Holders shall have waived application of the
provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or
more Subsidiaries, or any other business entity in which the Company or
one or more Subsidiaries or the Company and one or more Subsidiaries own
more than a 50% interest either in the
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<PAGE> 15
profits or capital of such business entity or (b) whose net earnings,
or portions thereof, are consolidated with the net earnings of the
Company and are recorded on the books of the Company for financial
reporting purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a
"sale" thereof within the meaning of the Securities Act.
"Triggering Event" shall mean the repayment in full of all
indebtedness under the Credit Agreement.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as
of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise
of Warrants until such time as such shares of Common Stock have either
been (i) Transferred in a public offering pursuant to a registration
statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof with all
transfer restrictions and restrictive legends with respect to such Common
Stock being removed in connection with such transaction. "Warrant Stock"
, for the purposes of Section 9 hereof, shall have the meaning set forth
in Section 9.1(b) hereof.
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"WS Holder" shall have the meaning set forth in Section 9.1(a)
hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00
P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from
time to time exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder (as determined
pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or
in part, the Holder shall (i) deliver to the Company at the Designated Office a
written notice of the Holder's election to exercise this Warrant (an "Exercise
Notice"), which Exercise Notice shall be irrevocable and specify the number of
shares of Common Stock to be purchased, together with this Warrant and (ii) pay
to the Company the Warrant Price (the date on which both such delivery and
payment shall have first taken place being hereinafter sometimes referred to as
the "Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly
executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
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<PAGE> 17
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current Market Price equal to such Warrant Price or(iv) by delivery
of a Note, duly endorsed by or accompanied by appropriate instruments of
transfer duly executed by the Holder or by the Holder's attorney duly
authorized in writing. In the event of any withholding of Warrant Stock or
surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Current Market Price is equal to the Warrant Price is
not a whole number, the number of shares withheld by or surrendered to the
Company shall be rounded up to the nearest whole share and the Company shall
make a cash payment to the Holder based on the incremental fraction of a share
being so withheld by or surrendered to the Company in an amount determined in
accordance with Section 2.3 hereof. For the purpose of making payment of the
Warrant Price, any Note surrendered to the Company shall be deemed to have a
value equal to 100% of the principal amount thereof plus any interest accrued
but unpaid thereon. If the Holder delivers a Note with a deemed value that
exceeds the Warrant Price, the Company shall reissue to the Holder a new Note
identical in all respects to the surrendered Note except that the principal
amount of such new Note shall be equal to the principal amount that, together
with any interest accrued but unpaid thereon, is equal to the deemed value of
the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassess-
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<PAGE> 18
able, issued without violation of any preemptive rights and free and clear of
all Liens (other than any created by actions of the Holder). The Company shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder and the Company shall reimburse
the Holder therefor on an After-Tax Basis.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
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<PAGE> 19
2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything
in this Warrant to the contrary, the Holder of this Warrant, if subject to the
Bank Holding Company Act or any provision of the Glass-Steagall Act, may
exercise this Warrant only if the Notice of Exercise is accompanied by an
Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such clearances would be obtained or
make it likely that such clearances would, if obtained, contain material
conditions adverse to such Holder. In the event that federal or state
regulatory clearances are required prior to the exercise of this Warrant by the
Holder hereof, the Company shall reasonably cooperate with such Holder in
providing such information to any regulatory agency as such agency may
reasonably require. In the event any such regulatory clearance is withheld or
denied, such Holder may continue to hold this Warrant until its expiration or
may sell or otherwise transfer this Warrant in accordance with the terms
hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
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<PAGE> 20
3.2. Division and Combination. Subject to compliance with the applicable
provisions of this Warrant, this Warrant may be divided or combined with other
Warrants upon presentation hereof at the Designated Office, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with the applicable provisions of this Warrant as to any transfer
which may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense any new Warrant or Warrants required to be issued under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
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numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to
the number of shares of Common Stock Outstanding immediately after such
adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If at any time
the Company shall issue or sell any shares of Common Stock in a Subsequent
Issuance for a consideration per share that is less than the Exercise Price in
effect immediately prior to such issuance or sale, then, forthwith upon such
issuance or sale, the Exercise Price shall be reduced to a price calculated by
dividing (1) an amount equal to the sum of (x) the number of shares of Common
Stock Outstanding immediately prior to such Subsequent Issuance multiplied by
the then existing Exercise Price, plus (y) the aggregate consideration
(determined in accordance with the provisions of Section 4.6 hereof), if any,
received by the Company in connection with such Subsequent Issuance, by (2) the
total number of shares of Common Stock Outstanding immediately after such
Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a)
In the event that the Company shall at any time issue, sell or grant any Stock
Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose
of Section 4.2 above, the Company shall be deemed to have issued at that time a
number of shares of Common Stock equal to the maximum number of shares of
Common Stock (without giving effect to any antidilution provisions in such
Stock Purchase Rights) that are or may become issuable upon exercise of such
Stock Purchase Rights (or upon exercise of any Convertible Securities issuable
upon exercise of such Stock Purchase Rights) for a consideration per share
equal to (i) the aggregate consideration per share (determined in accordance
with the provisions of Section 4.6 hereof) received by the Company in
connection with the issuance, sale or grant of such Stock Purchase Rights plus
(ii) the minimum
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amount of such consideration per share receivable by the Company in
connection with the exercise of such Stock Purchase Rights (and the exercise of
any Convertible Securities issuable upon exercise of such Stock Purchase
Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such Convertible Securities for a
consideration per share equal to (i) the aggregate consideration per share
(determined in accordance with the provisions of Section 4.6 hereof) received
by the Company in connection with the issuance or sale of such Convertible
Securities plus (ii) the minimum amount of such consideration per share
receivable by the Company in connection with the exercise of such conversion or
exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or
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Convertible Securities, any of such Stock Purchase Rights or the rights of
conversion or exchange associated with such Convertible Securities shall expire
by their terms or any of such Stock Purchase Rights or Convertible Securities
shall be repurchased by the Company or a Subsidiary thereof for a consideration
per underlying share of Common Stock not exceeding the amount of such
consideration received by the Company in connection with the issuance, sale or
grant of such Stock Purchase Rights or Convertible Securities, the Exercise
Price then in effect shall forthwith be increased to the Exercise Price that
would have been in effect if such expiring Stock Purchase Rights or rights of
conversion or exchange or such repurchased Stock Purchase Rights or Convertible
Securities had never been issued. Similarly, if at any time after any such
adjustment of the Exercise Price shall have been made pursuant to Section 4.2
(i) any additional consideration is received or becomes receivable by the
Company in connection with the issuance or exercise of such Stock Purchase
Rights or Convertible Securities or (ii) there is a reduction in the conversion
ratio applicable to such Convertible Securities so that fewer shares of Common
Stock will be issuable upon the conversion or exchange thereof or there is a
decrease in the number of shares of Common Stock issuable upon exercise of such
Stock Purchase Rights, the Exercise Price then in effect shall be forthwith
readjusted to the Exercise Price that would have been in effect had such
changes taken place at the time that such Stock Purchase Rights or Convertible
Securities were initially issued, granted or sold. In no event shall any
readjustment under this Section 4.3(d) affect the validity of any shares of
Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of
the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
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<PAGE> 24
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Holder of this Warrant shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In such event, the
aggregate Exercise Price otherwise payable for the shares of Common Stock
issuable upon exercise of this Warrant shall be allocated among the shares of
common stock and Other Property receivable as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modi-
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fications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which this Warrant thus becomes exercisable, which
modifications shall be as equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.5, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class that is not preferred as to dividends or assets over any other class
of stock of such corporation and that is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.5 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3
and 4.4 hereof, the consideration received and/or receivable by the Company in
connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any accrued interest or
dividends, expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company.
(2) Securities or Other Property. In the case of securities
or other property, the fair market value thereof as of the date
immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares
of Common Stock are issued or sold together with other securities
or other assets of the Company for a consideration which covers
both, the
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consideration received (computed as provided in (1) and
(2) above) shall be allocable to such shares of Common Stock as
determined in good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or
Convertible Securities shall be issued or sold together with other
securities or other assets of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to the Stock Purchase Rights or Convertible Securities,
the consideration allocable to such Stock Purchase Rights or
Convertible Securities shall be determined in good faith by the
Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or
Convertible Securities, such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or
sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the
fair value on the date of issuance of such security of such
portion of the assets and business of the non-surviving
corporation attributable to such Common Stock, Stock Purchase
Rights or Convertible Securities, as is determined in good faith by the
Company's Board of Directors.
(7) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good faith
by the
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Majority Warrant Holders, and any dispute shall be resolved
by an investment banking or appraisal firm of recognized national
standing selected by the Company and reasonably acceptable to the
Majority Warrant Holders and whose decision shall be binding on
the Company and all holders of Warrants. The fees and expenses of
such firm shall be paid by the party or parties whose position is
not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential intent and
principles hereof (including, without limitation, the issuance of securities
other than Common Stock which have the right to participate in distributions to
the holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
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4.8. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase
Rights, then all references in this Section 4 to the date of the issuance
or sale of such shares of Common Stock, Convertible Securities or Stock
Purchase Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1
above, at no time shall the Exercise Price per share of Common Stock
exceed the amount set forth in the first paragraph of the preamble of
this Warrant.
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(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock
to be less than the Exercise Price that would result from such
transaction.
(g) Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to this Section 4, the Company
shall forthwith prepare a certificate to be executed by the
President or chief financial officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated, specifying the
number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section
4.5) describing the number and kind of any other shares of stock
or Other Property for which this Warrant is exercisable, and any
related change in the Exercise Price, after giving effect to such
adjustment or change. The Company shall promptly cause a signed
copy of such certificate to be delivered to each Holder in
accordance with Section 15.2. The Company shall keep at its
principal office or at the Designated Office, if different, copies
of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any
Holder or any prospective transferee of a Warrant designated by a
Holder thereof.
(h) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an
event occurs that requires the application of more than one
subsection, all applicable subsections shall be given independent
effect without duplication.
5. NO IMPAIRMENT
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The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or reasonably appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company shall take all such action as may be
necessary or reasonably appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all Liens, and shall use all
commercially reasonably efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or
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(b) any amendment of the Certificate of Incorporation of the Company, the
Company shall mail to each Holder of a Warrant in accordance with the
provisions of Section 14.2 hereof a notice specifying the date or expected date
on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for the securities
or Other Property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer or disposition, and a
description in reasonable detail of the transaction. Such notice shall be
mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of
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Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion
of Counsel to the effect that such legend is not required for the purposes of
compliance with the Securities Act. Holders of the Warrants or the Restricted
Common Stock, as the case may be, shall not be entitled to Transfer such
Warrants or such Restricted Common Stock except in accordance with this Section
8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS
(A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
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"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company, at the expense of the
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Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the Holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series B Warrants and the
holders of Warrant Stock (as defined in Section 9.1(b)) are collectively
referred to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series B Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with
respect to such Common Stock being removed in connection with such
transaction,(ii) any other securities issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in
exchange by the Company generally for, or in replacement by the Company
generally of,
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any shares of Warrant Stock and (iii) any securities
issued in exchange for any such Warrant Stock in any merger or
reorganization of the Company, but in the cases of clauses (ii) and (iii)
only so long as such securities have not been registered and Transferred
pursuant to the Securities Act or Transferred in a transaction exempt
from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect to such securities are
removed in connection with such Transfer.
(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series B Warrants held
by such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total
number of shares of Warrant Stock Outstanding as of such date plus (ii)
the number of shares of Warrant Stock issuable upon exercise of all
outstanding Warrants and Series B Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series B
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives
at any time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares of
Warrant Stock then outstanding (the "Demanding Holders") that the Company file a
registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration will
be for
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an offering on a delayed or continual basis pursuant to Rule 415
under the Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration, the
Company shall:
(1) File the requested registration statement with the Commission
as promptly as practicable, and shall use all commercially reasonable
efforts to have the registration declared effective under the Securities
Act as soon as reasonably practicable, in each instance giving due
regard to the need to prepare and file current financial statements,
conduct due diligence and complete other actions that are reasonably
necessary to effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand
Registration, for up to 90 days or until such earlier date as of which
all Registrable Securities covered by such registration statement shall
have been disposed of in the manner described in the registration
statement, and (y) if a Shelf Registration, for 270 days.
Notwithstanding the foregoing, if for any reason the effectiveness of a
Demand Registration is suspended or postponed as permitted by Subsection
(d) below, the foregoing period shall be extended by the aggregate number
of days of such suspension or postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not
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satisfied or waived, other than by reason of a failure on the part of the
Selling Holders. If the Company shall have complied with its obligations under
this Section 9, a right to demand a registration pursuant to this Section 9.2
shall be deemed to have been satisfied (i) if a Demand Registration other than
a Shelf Registration, upon the earlier of (x) the date as of which all of the
Registrable Securities included therein shall have been disposed of pursuant to
the registration statement and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of 90 days,
and (ii) if a Shelf Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or
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"all reasonable efforts" basis or otherwise), or an agented offering, the
Majority Selling Holders shall have the right to select the underwriter or
underwriters and manager or managers to administer such underwritten offering
or the placement agent or agents for such agented offering from among the
entities listed in Schedule B hereto (or any successors of any such entities),
it being understood that the Majority Selling Holders shall use commercially
reasonable efforts to select one or more of the first three listed entities
subject to arriving at reasonably acceptable terms and conditions for the
offering.
(f) The Company may elect to include shares of Common Stock to be sold for
its account in any such Demand Registration (including a Shelf Registration);
provided, however, if the managing underwriter shall advise the Demanding
Holders in writing (with a copy to the Company) that, in its opinion, the
number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be realized
therefor, or the timing thereof, then the number of shares proposed to be
included in such Demand Registration by the Company shall be reduced, to such
number that the Demanding Holders are advised can be sold without such effect
in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders of the Company other than the WS Holders) equity securities under
the Securities Act in connection with the public offering solely for
cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the
Company shall promptly give each WS Holder written notice of such registration
(a "Piggyback Registration"). Upon the written request of each WS Holder given
within 20 days following the date of such notice, the Company shall cause to be
included in such registration statement and use its best efforts to be
registered under the Securities Act all the Registrable Securities that each
such WS Holder shall have requested to be registered. The Company shall have
the absolute right to withdraw or cease to prepare or file any registration
statement for any offering referred to in this Section 9.3 without any
obligation or liability to any WS Holder.
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(b) If the managing underwriter shall advise the Company in writing (with
a copy to each Selling Holder) that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, or the timing thereof, then the Company will
include in such registration, to the extent of the amount and class which the
Company is so advised can be sold without such material adverse effect in such
offering: first, all securities proposed to be sold by the Company for its own
account; and second, the Warrant Stock requested to be included in such
registration by WS Holders and all other securities requested to be included in
such registration by Persons other than the Company and WS Holders, the
securities covered by this clause second to be included pro rata based on the
estimated gross proceeds from the sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable Securities
included in an unlimited number of Piggyback Registrations pursuant to this
Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement
with respect to such Warrant Stock and use the Company's best efforts to
cause such registration statement to become effective; provided, however,
that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by
reference after the initial filing of the registration statement and
prior to effectiveness thereof, the Company shall furnish to one firm of
counsel for the Selling Holders (selected by Majority Selling Holders)
copies of all such documents in the form substantially as proposed to be
filed with the Commission at least four Business Days prior to filing for
review and comment by such counsel, which opportunity to comment shall
include an absolute right to control or contest disclosure
if the applicable Selling Holder reasonably believes that it may be
subject to controlling person liability under applicable securities laws
with respect thereto.
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(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with
respect to the disposition of all securities covered by such registration
statement. If the registration is for an underwritten offering, the
Company shall amend the registration statement or supplement the
prospectus whenever required by the terms of the underwriting agreement
entered into pursuant to Section 9.4(e). Subject to Rule 415 under the
Securities Act, if the registration statement is a Shelf Registration,
the Company shall amend the registration statement or supplement the
prospectus so that it will remain current and in compliance with the
requirements of the Securities Act for 270 days or after its effective
date, and if during such period any event or development occurs as a
result of which the registration statement or prospectus contains a
misstatement 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, the Company shall promptly notify each Selling Holder,
amend the registration statement or supplement the prospectus so that
each will thereafter comply with the Securities Act and furnish to each
Selling Holder of Registrable Securities such amended or supplemented
prospectus, which each such Holder shall thereafter use in the Transfer
of Warrant Stock covered by such registration statement. Pending such
amendment or supplement each such Selling Holder shall cease making
offers or Transfers of Registerable Securities pursuant to the prior
prospectus. In the event that any Registrable Securities included in a
registration statement subject to, or required by, this Warrant remain
unsold at the end of the period during which the Company is obligated to
use its best efforts to maintain the effectiveness of such registration
statement, the Company may file a post-effective amendment to the
registration statement for the purpose of removing such Registrable
Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities,
without charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each
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preliminary prospectus and any amendments or supplements thereto, in
each case in conformity with the requirements of the Securities Act and
the rules thereunder, and such other related documents as any such
Selling Holder may reasonably request in order to facilitate the
disposition of Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states or jurisdictions as
shall be reasonably requested by the managing underwriter (as applicable,
or if inapplicable, the Majority Selling Holders), and (ii) to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or
exemption from qualification) of the offer and transfer of any of the
Registrable Securities in any jurisdiction, at the earliest possible
moment; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not
be required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
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(g) Make generally available to the Company's security holders
copies of all periodic reports, proxy statements, and other information
referred to in Section 9.9(a) and an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later than 90 days
following the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of each registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of
such Selling Holder and underwriter (but not more than one firm of
counsel to such Selling Holders), all financial and other information as
shall be reasonably requested by them, and provide the Selling Holder,
any underwriter participating in such offering and the representatives of
such Selling Holder and underwriter the opportunity to discuss the
business affairs of the Company with its principal executives and
independent public accountants who have certified the audited financial
statements included in such registration statement, in each case all as
necessary to enable them to exercise their due diligence responsibility
under the Securities Act; provided, however, that information that the
Company determines, in good faith, to be confidential and which the
Company advises such Person in writing, is confidential shall not be
disclosed unless such Person signs a confidentiality agreement reasonably
satisfactory to the Company or the related Selling Holder of Registrable
Securities agrees to be responsible for such Person's breach of
confidentiality on terms reasonably satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of
the type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company
shall furnish to each Selling Holder a signed counterpart of any such
comfort letter or legal opinion. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written
representations or acknowledgments as are customarily
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provided by selling shareholders who receive such comfort letters or
opinions.
(j) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a recognized
trading market, to continue to be so listed or included for a reasonable
period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations
of the Company to enable the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number
for the Common Stock prior to the effective date of the first
registration statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 9
with respect to the Registrable Securities of any Selling Holder that such
Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Selling Holder's Registrable Securities,
and to cooperate with the Company in preparing such registration; and
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(ii) Agree to sell their Registrable Securities to the underwriters
at the same price and on substantially the same terms and conditions as
the Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and to
execute the underwriting agreement agreed to by the Majority Selling
Holders (in the case of a registration under Section 9.2) or the Company
and the Majority Selling Holders (in the case of a registration under
Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of
such Selling Holder's shares registered for sale pursuant to this Section
9; provided, however, it is understood that any failure so to notify the
Company shall not be deemed a default hereunder or to subject any Selling
Holder to any claim for damages or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of
one firm of counsel for the Selling Holders of Registrable Securities
(the "Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense),
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unless WS Holders whose Registrable Securities constitutes a
majority of the Registrable Securities then outstanding agree that such
withdrawn registration shall constitute the exercise of their one demand
registration under Section 9.2 hereof. The counsel for the Selling
Holders shall be selected by Demanding Holders owning a majority of the
Registrable Securities owned by Demanding Holders to be included in a
Demand Registration and, in the case of a Piggyback Registration, by
Selling Holders owning a majority of the Registrable Securities to be
included in such registration; provided that in the case of a Piggyback
Registration, the Selling Holders shall use one firm of counsel to
represent all such holders and shall endeavor in good faith, with any
other holders of securities to be included in such registration, to
select one firm of counsel to represent all such selling securities
holders.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to
Section 9.3 for each Selling Holder, but excluding underwriting discounts
and commissions relating to Registrable Securities (which shall be paid
on a pro rata basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act,
and each officer, director, partner, and employee of such Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may
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become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations pursuant to a final
non-appealable order (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein,
or any amendments or supplements thereto;
(ii) 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; or
(iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any applicable state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any applicable state securities
law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or expense to the extent that
it is determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation which occurred in reliance upon and in conformity with written
information furnished to the Company by the indemnified party expressly
for use in connection with such registration; provided, further, that the
indemnity agreement contained in this Section 9.7(a) shall not apply to
any underwriter to the extent that any such loss is based on or arises
out of an untrue statement or alleged untrue statement of a material
fact, or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the final
prospectus shall correct such untrue statement or
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alleged untrue statement, or such omission or alleged omission, and a
copy of the final prospectus has not been sent or given to such person at
or prior to the confirmation of sale to such person if such underwriter
was under an obligation to deliver such final prospectus and failed to do
so. The Company shall also indemnify underwriters, selling brokers,
dealer managers and similar securities industry professionals
participating in the distribution, their officers, directors, agents and
employees and each person who controls such persons (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) to
the same extent as provided above with respect to the indemnification of
the Selling Holders.
(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors,
each of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling
Holder, any controlling Person of any such other Selling Holder and each
officer, director, partner, and employee of such other Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses are determined by a court of competent
jurisdiction by a final non-appealable order to have solely arisen out of
or be based upon a Violation that occurred in reliance upon and in
conformity with written information furnished by such Selling Holder
expressly for use in connection with such registration; provided,
however, that (x) the indemnification required by this Section 9.7(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which
consent shall not be unreasonably withheld, and (y) in no event shall the
amount of any indemnity under this Section 9.7(b) exceed the net
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proceeds from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9.7 of notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing for which
such indemnified party may make a claim under this Section 9.7, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of
any such action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified
party under this Section 9.7 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 9.7. Any reasonable fees and expenses incurred
by the indemnified party (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within
thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such
indemnified party shall have the right to employ separate counsel in any
such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying party shall have
failed to promptly assume the
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defense of such action, claim or proceeding or (iii) the named parties
to any such action, claim or proceeding (including any impleaded parties)
include both such indemnified party and the indemnifying party, and such
indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the
assertion of such defenses would create a conflict of interest such that
counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies
the indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection with any
one such action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the
reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred
to in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute
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to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with
the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or
relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or
other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault
of such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and
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when bills are received or expense, loss, damage or liability is
incurred. In the event that it shall be subsequently determined that the
recipient of any such periodic payment shall not be entitled to
indemnification hereunder, such recipient promptly shall repay such
payments, together with interest thereon at the Agreed Rate from the date
of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the
completion of any offering of Registrable Securities pursuant to a
registration statement under this Section 9, and otherwise.
9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to
have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities
or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or agented
registration), during the 5-day period prior to, and during the 45-day period
beginning on, the date such registration statement is declared effective under
the Securities Act by the Commission, provided that such WS Holder is timely
notified of such effective date in writing by the Company or such managing
underwriter.
9.9. Additional Covenants of the Company. The Company hereby agrees and
covenants as follows:
(a) The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If
the Company is not required to file reports pursuant to the Exchange Act,
upon the request of any WS Holder, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of
the Securities Act, and take such further action as may be reasonably
required from time to time and as may be within the reasonable control of
the Company, to enable the WS Holders to Transfer Warrants or Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the
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Securities Act or any similar rule or regulation hereafter adopted by
the Commission. In addition, promptly upon the request of any WS Holder,
the Company shall provide such WS Holder with such publicly available
financial statements, reports and other information as may be required to
permit such WS Holder to Transfer shares of Registrable Securities to
Qualified Institutional Investors pursuant to Rule 144A of the Securities
Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Common Stock, Convertible Securities or Stock Purchase Rights during the
5 Business Days prior to, and during the 90-day period beginning on, the
commencement of a public distribution of Registrable Securities pursuant
to any registration statement prepared pursuant to this Section 9 (other
than by the Company pursuant to such registration if the registration is
pursuant to Section 9.3 or by the Company pursuant to any dividend
reinvestment plan offered by it to its stockholders). The Company shall
not effect any registration of its securities (other than on Form S-4,
Form S-8, or any successor forms to such forms or pursuant to such other
registration rights agreements as may be approved in writing by the
Majority Selling Holders) or effect any public or private sale or
distribution of any of its securities, including a sale pursuant to
Regulation D under the Securities Act, whether on its own behalf or at
the request of any holder or holders of such securities from the date of
a request for a Demand Registration pursuant to Section 9.2 until 90 days
following the effective date of such Demand Registration statement,
unless the Company shall have previously notified in writing all Selling
Holders of the Company's desire to do so, and the Majority Selling
Holders or the managing underwriter, if any, shall have consented thereto
in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant
to which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or
other agreement) shall contain a provision whereby any holder receiving
such Common Stock who will hold more than one
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percent (1%) of the amount of such Common Stock then outstanding shall
agree not to effect any public sale or distribution of any such Common
Stock during the periods described in the second sentence of Section
9.9(b), in each case including a sale pursuant to Rule 144 under the
Securities Act (unless such Person is prevented by applicable statute or
regulation from entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer
or agree to Transfer all or substantially all the Company's assets,
unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively,
shall have agreed in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which
the WS Holders would be entitled to receive in exchange for Registrable
Securities pursuant to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of Caisse Nationale de Credit Agricole shall be a sufficient indemnity)
and, in case of mutilation, upon surrender and cancellation hereof, the Company
will execute and deliver in lieu hereof a new Warrant of like tenor to such
Holder; provided, however, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
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As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular and
periodic reports, proxy statements (other than preliminary) and
registration statements (other than registration statements on Forms S-3
(relating to debt securities) and S-8) which the Company may file with
the Securities and Exchange Commission or any governmental agency
substituted therefor.
(ii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
or made available by the Company to the holders of any class of
its securities generally or by any Subsidiary of the Company to
the holders of any class of its securities generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
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13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice (the
"Call Notice") to the Holders of all outstanding Warrants given at any time on
or after the date of the occurrence of the Triggering Event and before May 31,
1997, to repurchase on the date specified in the notice from each Holder of a
Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series A Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series A Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender of
this Warrant at the Designated Office against payment of the repurchase price
therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
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or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss, cost,
damage, reasonable attorneys' and accountants' fees and expenses, court costs
and all other out-of-pocket expenses incurred in connection with or arising
from a Company Default. This indemnification provision shall be in addition to
the rights of such Holder or Holders to bring an action against the Company for
breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this War-
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rant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provisions of Sections 3.1,
8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock
issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
14.7. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such
Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the written consent of the Holder thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS
APPLICABLE TO CONTRACTS MADE AND
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<PAGE> 58
PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS
SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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<PAGE> 59
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 61
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.3
================================================================================
SERIES A WARRANT
to Purchase Common Stock of
NORAND CORPORATION
================================================================================
Warrant No. A - 3
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 14
3.1. Transfer 14
3.2. Division and Combination. 14
3.3. Expenses. 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and
Convertible Securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under
this Section 21
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions. 23
7.2 Closing of Transfer Books. 23
8. TRANSFER RESTRICTIONS 24
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures. 30
9.5. Selling Holders' Obligations. 34
9.6. Expenses of Registration. 34
9.7. Indemnification; Contribution. 35
9.8. Holdback. 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver. 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability. 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment. 45
14.8. Severability 45
14.9. Headings. 45
14.10. GOVERNING LAW; JURISDICTION. 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
SCHEDULE B UNDERWRITERS AND AGENTS
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<PAGE> 4
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS
MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED
SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S)
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER.
Warrant No. A - 3
SERIES A WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT FLEET NATIONAL BANK, or registered assigns, is
entitled, at any time after May 31, 1997 and prior to the Expiration Date (such
term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from NORAND CORPORATION, a Delaware corporation (the
"Company"), Forty-three Thousand Five Hundred Fifty-four (43,554) shares of the
Common Stock of the Company (subject to adjustment as provided herein), at a
purchase price of $21.15 per share (the initial "Exercise Price", subject to
adjustment as provided herein), all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
<PAGE> 5
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any
class of voting stock of such Person and has the power to vote such
shares or (c) more than ten percent of the outstanding shares of any
class of voting stock (or, in the case of a Person which is not a
corporation, more than ten percent of the equity interest) of which is
beneficially owned or held by such Person and such Person has the power
to vote such shares or equity interest. The term "control" as used with
respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate
base rate of interest announced by The First National Bank of Chicago
from time to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined
by an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and
conditions for the
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<PAGE> 6
appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination
of Appraised Value shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company
taken as a whole, based on the higher of (A) the value derived from a
hypothetical sale of the entire Company as a going concern by a willing
seller to a willing buyer (neither acting under any compulsion) and (B)
the liquidation value of the entire Company. No discount shall be
applied on account of (i) any Warrants or Warrant Stock representing a
minority interest, (ii) any lack of liquidity of the Common Stock or the
Warrants, (iii) the fact that the Warrants or Warrant Stock may
constitute "restricted securities" for securities law purposes or (iv)
the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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<PAGE> 7
class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.5 hereof) received by or distributed to the holders
of Common Stock of the Company in the circumstances contemplated by
Section 4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the
Company to comply in any material respect with any covenant of the
Company contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and
available for Transfers of Warrant Stock thereunder for the longer of
either (i) any ten consecutive Business Days, or (ii) an aggregate of
fifteen Business Days during the period specified in the relevant
provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or
exchangeable for, with or without payment of additional consideration in
cash or property, shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the
Lenders party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for
the shorter of (x) the twenty consecutive Business Days immediately
preceding such date or (y) the period commencing on the Business Day next
following the first public announcement of any event giving rise to an
adjustment of the Exercise Price pursuant to Section 4 below
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<PAGE> 8
and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a
National Market System security, the last sale price, regular way, on
such day on the principal stock exchange or market system on which such
Common Stock is then listed or admitted to trading, or, if no such sale
takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day as reported on such stock exchange or
market system or (ii) if the Common Stock is not then listed or admitted
to trading on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter,
the average of the closing bid and asked prices for the Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National
Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section
9.2(a) hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms
of which equity capital are acceptable to the Majority Warrant Holders)
raised by and/or contributed to the Company subsequent to the Original
Issue Date or new Indebtedness (as defined in the Credit Agreement)
subordinated to the Obligations (as defined in the Credit Agreement),
provided the terms of such Indebtedness (including, without limitation,
maturity, amortization, covenants, defaults, remedies and subordination
provisions) are acceptable to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time
to time.
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<PAGE> 9
"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to
Section 4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under
the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date
shall mean (A) if the Common Stock is publicly traded on such date, the
Current Market Price per share or (B) if the Common Stock is not publicly
traded on such date, (1) the fair market value per share of Common Stock
as determined in good faith by the Board of Directors of the Company and
set forth in a written notice to each Holder or (2) if the Majority
Warrant Holders object in writing to such price as determined by the
Board of Directors within thirty days after receiving notice of same, the
Appraised Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to
be determined, all shares of Common Stock Outstanding on such date and
all shares of Common Stock issuable in respect of (x) the Warrants
outstanding on such date, (y) any Convertible Securities outstanding on
such date and (z) any other Stock Purchase Rights outstanding on such
date, in each case regardless of whether or not the conversion, exchange,
subscription or purchase rights associated with such Convertible
Securities or Stock Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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<PAGE> 10
"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or
entailing a finding, that the Company is insolvent or bankrupt, or
seeking reorganization, liquidation, dissolution, winding-up, charter
revocation or other similar relief with respect to the Company or any of
its properties, assets or debts, or seeking the appointment of a
receiver, trustee, custodian, liquidator, sequestrator or similar
official for the Company or any of its properties or assets, or the
Company becoming insolvent or bankrupt or generally unable to pay its
debts as they become due, or the Company voluntarily suspending its
business or making a general assignment for the benefit of creditors;
provided that an Insolvency Event shall not be deemed to have occurred on
account of any such proceeding which is involuntary on the part of the
Company unless same shall not have been dismissed or stayed within 60
days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement perfecting a security interest under the
Uniform Commercial Code or comparable law of any jurisdiction).
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<PAGE> 11
"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock
(with any such Warrants being deemed to represent, for the purposes of
such calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced
in Securities Act or bank regulatory matters, as the case may be, chosen
by the Holder of this Warrant or Warrant Stock issued upon the exercise
hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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<PAGE> 12
"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary thereof, and shall
include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Outstanding", when used with respect to Warrant Stock for the purposes
of Section 9 hereof shall have the meaning set forth in Section 9.1(d)
hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth
in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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<PAGE> 13
"Selling Holders" shall mean, with respect to a specified
registration under Section 9 hereof, WS Holders whose Registrable
Securities are included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with,
and having the same terms (other than the number of shares purchasable
upon the exercise thereof) as, this Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with this
Warrant.
"Settlement Stock" shall mean the shares of Common Stock
contemplated to be issued in settlement of the pending shareholders'
claims against the Company with respect to the litigation styled In re
Norand Corporation Securities Litigation, Master File No. C95-323,
pending in the United States District Court for the Northern District of
Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in Section
2.1(c) hereof.
"Shelf Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after
the Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the
Warrants and any issuance of Common Stock, Convertible Securities
or Stock Purchase Rights (and
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<PAGE> 14
any issuance of Common Stock pursuant to the conversion, exchange
or exercise of any such Convertible Securities or Stock Purchase
Rights) deemed to have been issued as of the Original Issue Date
pursuant to the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant
(other than warrants granted to Jay Alix and Associates and to
Donald W. Rowley for up to the respective number of shares set
forth on Schedule A) granted or issued after the Original Issue
Date shall not be less than the "daily market price" (as that term
is defined in the definition of Current Market Price) of the Common
Stock on the date of grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) The issuance of Common Stock or Convertible Securities
directly related to the Company's receipt of Equity if, and only
if, the aggregate Equity actually received by the Company between
the Original Issue Date and August 31, 1997 equals or exceeds $20
million (otherwise, after August 31, 1997, all such issuances, both
prior to and after August 31, 1996, shall be considered a
Subsequent Issuance for purposes of Section 4 hereof).
(v) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights with respect to which the
Majority Warrant Holders shall have waived application of the
provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or
more Subsidiaries, or any other business entity in which the Company or
one or more Subsidiaries or the Company and one or more Subsidiaries own
more than a 50% interest either in the
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<PAGE> 15
profits or capital of such business entity or (b) whose net earnings, or
portions thereof, are consolidated with the net earnings of the Company
and are recorded on the books of the Company for financial reporting
purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a
"sale" thereof within the meaning of the Securities Act.
"Triggering Event" shall mean the repayment in full of all
indebtedness under the Credit Agreement.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as
of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise
of Warrants until such time as such shares of Common Stock have either
been (i) Transferred in a public offering pursuant to a registration
statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof with all
transfer restrictions and restrictive legends with respect to such Common
Stock being removed in connection with such transaction. "Warrant
Stock", for the purposes of Section 9 hereof, shall have the meaning set
forth in Section 9.1(b) hereof.
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<PAGE> 16
"WS Holder" shall have the meaning set forth in Section 9.1(a)
hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00
P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from
time to time exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder (as determined
pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or
in part, the Holder shall (i) deliver to the Company at the Designated Office a
written notice of the Holder's election to exercise this Warrant (an "Exercise
Notice"), which Exercise Notice shall be irrevocable and specify the number of
shares of Common Stock to be purchased, together with this Warrant and (ii) pay
to the Company the Warrant Price (the date on which both such delivery and
payment shall have first taken place being hereinafter sometimes referred to as
the "Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly
executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
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(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current Market Price equal to such Warrant Price or(iv) by delivery
of a Note, duly endorsed by or accompanied by appropriate instruments of
transfer duly executed by the Holder or by the Holder's attorney duly
authorized in writing. In the event of any withholding of Warrant Stock or
surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Current Market Price is equal to the Warrant Price is
not a whole number, the number of shares withheld by or surrendered to the
Company shall be rounded up to the nearest whole share and the Company shall
make a cash payment to the Holder based on the incremental fraction of a share
being so withheld by or surrendered to the Company in an amount determined in
accordance with Section 2.3 hereof. For the purpose of making payment of the
Warrant Price, any Note surrendered to the Company shall be deemed to have a
value equal to 100% of the principal amount thereof plus any interest accrued
but unpaid thereon. If the Holder delivers a Note with a deemed value that
exceeds the Warrant Price, the Company shall reissue to the Holder a new Note
identical in all respects to the surrendered Note except that the principal
amount of such new Note shall be equal to the principal amount that, together
with any interest accrued but unpaid thereon, is equal to the deemed value of
the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassess-
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able, issued without violation of any preemptive rights and free and clear of
all Liens (other than any created by actions of the Holder). The Company shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder and the Company shall reimburse
the Holder therefor on an After-Tax Basis.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
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2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything
in this Warrant to the contrary, the Holder of this Warrant, if subject to the
Bank Holding Company Act or any provision of the Glass-Steagall Act, may
exercise this Warrant only if the Notice of Exercise is accompanied by an
Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such clearances would be obtained or
make it likely that such clearances would, if obtained, contain material
conditions adverse to such Holder. In the event that federal or state
regulatory clearances are required prior to the exercise of this Warrant by the
Holder hereof, the Company shall reasonably cooperate with such Holder in
providing such information to any regulatory agency as such agency may
reasonably require. In the event any such regulatory clearance is withheld or
denied, such Holder may continue to hold this Warrant until its expiration or
may sell or otherwise transfer this Warrant in accordance with the terms
hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
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<PAGE> 20
3.2. Division and Combination. Subject to compliance with the applicable
provisions of this Warrant, this Warrant may be divided or combined with other
Warrants upon presentation hereof at the Designated Office, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with the applicable provisions of this Warrant as to any transfer
which may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense any new Warrant or Warrants required to be issued under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to
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the number of shares of Common Stock Outstanding immediately prior to
the adjustment and the denominator of which is equal to the number of shares of
Common Stock Outstanding immediately after such adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If at any time
the Company shall issue or sell any shares of Common Stock in a Subsequent
Issuance for a consideration per share that is less than the Exercise Price in
effect immediately prior to such issuance or sale, then, forthwith upon such
issuance or sale, the Exercise Price shall be reduced to a price calculated by
dividing (1) an amount equal to the sum of (x) the number of shares of Common
Stock Outstanding immediately prior to such Subsequent Issuance multiplied by
the then existing Exercise Price, plus (y) the aggregate consideration
(determined in accordance with the provisions of Section 4.6 hereof), if any,
received by the Company in connection with such Subsequent Issuance, by (2) the
total number of shares of Common Stock Outstanding immediately after such
Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a)
In the event that the Company shall at any time issue, sell or grant any Stock
Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose
of Section 4.2 above, the Company shall be deemed to have issued at that time a
number of shares of Common Stock equal to the maximum number of shares of
Common Stock (without giving effect to any antidilution provisions in such
Stock Purchase Rights) that are or may become issuable upon exercise of such
Stock Purchase Rights (or upon exercise of any Convertible Securities issuable
upon exercise of such Stock Purchase Rights) for a consideration per share
equal to (i) the aggregate consideration per share (determined in accordance
with the provisions of Section 4.6 hereof) received by the Company in
connection with the issuance, sale or grant of such Stock Purchase Rights plus
(ii) the minimum
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amount of such consideration per share receivable by the Company in connection
with the exercise of such Stock Purchase Rights (and the exercise of any
Convertible Securities issuable upon exercise of such Stock Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such Convertible Securities for a
consideration per share equal to (i) the aggregate consideration per share
(determined in accordance with the provisions of Section 4.6 hereof) received
by the Company in connection with the issuance or sale of such Convertible
Securities plus (ii) the minimum amount of such consideration per share
receivable by the Company in connection with the exercise of such conversion or
exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or
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<PAGE> 23
Convertible Securities, any of such Stock Purchase Rights or the rights of
conversion or exchange associated with such Convertible Securities shall expire
by their terms or any of such Stock Purchase Rights or Convertible Securities
shall be repurchased by the Company or a Subsidiary thereof for a consideration
per underlying share of Common Stock not exceeding the amount of such
consideration received by the Company in connection with the issuance, sale or
grant of such Stock Purchase Rights or Convertible Securities, the Exercise
Price then in effect shall forthwith be increased to the Exercise Price that
would have been in effect if such expiring Stock Purchase Rights or rights of
conversion or exchange or such repurchased Stock Purchase Rights or Convertible
Securities had never been issued. Similarly, if at any time after any such
adjustment of the Exercise Price shall have been made pursuant to Section 4.2
(i) any additional consideration is received or becomes receivable by the
Company in connection with the issuance or exercise of such Stock Purchase
Rights or Convertible Securities or (ii) there is a reduction in the conversion
ratio applicable to such Convertible Securities so that fewer shares of Common
Stock will be issuable upon the conversion or exchange thereof or there is a
decrease in the number of shares of Common Stock issuable upon exercise of such
Stock Purchase Rights, the Exercise Price then in effect shall be forthwith
readjusted to the Exercise Price that would have been in effect had such
changes taken place at the time that such Stock Purchase Rights or Convertible
Securities were initially issued, granted or sold. In no event shall any
readjustment under this Section 4.3(d) affect the validity of any shares of
Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of
the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such
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<PAGE> 24
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Holder of this Warrant shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In such event, the
aggregate Exercise Price otherwise payable for the shares of Common Stock
issuable upon exercise of this Warrant shall be allocated among the shares of
common stock and Other Property receivable as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modi-
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fications as may be reasonably deemed appropriate (as determined by resolution
of the Board of Directors of the Company) in order to provide for adjustments
of any shares of the common stock of such successor or acquiring corporation
for which this Warrant thus becomes exercisable, which modifications shall be
as equivalent as practicable to the adjustments provided for in this Section 4.
For purposes of this Section 4.5, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class that is not
preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3
and 4.4 hereof, the consideration received and/or receivable by the Company in
connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any accrued interest or
dividends, expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company.
(2) Securities or Other Property. In the case of securities
or other property, the fair market value thereof as of the date
immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares
of Common Stock are issued or sold together with other securities
or other assets of the Company for a consideration which covers
both, the
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consideration received (computed as provided in (1) and (2) above)
shall be allocable to such shares of Common Stock as determined in
good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or
Convertible Securities shall be issued or sold together with other
securities or other assets of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to the Stock Purchase Rights or Convertible Securities,
the consideration allocable to such Stock Purchase Rights or
Convertible Securities shall be determined in good faith by the
Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or
Convertible Securities, such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or
sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the
fair value on the date of issuance of such security of such
portion of the assets and business of the non-surviving
corporation attributable to such Common Stock, Stock Purchase
Rights or Convertible Securities, as is determined in good faith
by the Company's Board of Directors.
(7) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good faith
by the
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Majority Warrant Holders, and any dispute shall be resolved by an
investment banking or appraisal firm of recognized national
standing selected by the Company and reasonably acceptable to the
Majority Warrant Holders and whose decision shall be binding on
the Company and all holders of Warrants. The fees and expenses of
such firm shall be paid by the party or parties whose position is
not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential intent and
principles hereof (including, without limitation, the issuance of securities
other than Common Stock which have the right to participate in distributions to
the holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
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<PAGE> 28
4.8. Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase
Rights, then all references in this Section 4 to the date of the issuance
or sale of such shares of Common Stock, Convertible Securities or Stock
Purchase Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1
above, at no time shall the Exercise Price per share of Common Stock
exceed the amount set forth in the first paragraph of the preamble of
this Warrant.
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(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock
to be less than the Exercise Price that would result from such
transaction.
(g) Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to this Section 4, the Company
shall forthwith prepare a certificate to be executed by the
President or chief financial officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated, specifying the
number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section
4.5) describing the number and kind of any other shares of stock
or Other Property for which this Warrant is exercisable, and any
related change in the Exercise Price, after giving effect to such
adjustment or change. The Company shall promptly cause a signed
copy of such certificate to be delivered to each Holder in
accordance with Section 15.2. The Company shall keep at its
principal office or at the Designated Office, if different, copies
of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any
Holder or any prospective transferee of a Warrant designated by a
Holder thereof.
(h) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an
event occurs that requires the application of more than one
subsection, all applicable subsections shall be given independent
effect without duplication.
5. NO IMPAIRMENT
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The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or reasonably appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company shall take all such action as may be
necessary or reasonably appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all Liens, and shall use all
commercially reasonably efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or
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(b) any amendment of the Certificate of Incorporation of the Company, the
Company shall mail to each Holder of a Warrant in accordance with the
provisions of Section 14.2 hereof a notice specifying the date or expected date
on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for the securities
or Other Property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer or disposition, and a
description in reasonable detail of the transaction. Such notice shall be
mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of
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Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion
of Counsel to the effect that such legend is not required for the purposes of
compliance with the Securities Act. Holders of the Warrants or the Restricted
Common Stock, as the case may be, shall not be entitled to Transfer such
Warrants or such Restricted Common Stock except in accordance with this Section
8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS
(A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
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"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company, at the expense of the
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Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the Holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series B Warrants and the
holders of Warrant Stock (as defined in Section 9.1(b)) are collectively
referred to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series B Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with
respect to such Common Stock being removed in connection with such
transaction,(ii) any other securities issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in
exchange by the Company generally for, or in replacement by the Company
generally
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of, any shares of Warrant Stock and (iii) any securities issued in
exchange for any such Warrant Stock in any merger or reorganization of
the Company, but in the cases of clauses (ii) and (iii) only so long as
such securities have not been registered and Transferred pursuant to the
Securities Act or Transferred in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect to such securities are removed in
connection with such Transfer.
(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series B Warrants held
by such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total
number of shares of Warrant Stock Outstanding as of such date plus (ii)
the number of shares of Warrant Stock issuable upon exercise of all
outstanding Warrants and Series B Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series B
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives at any
time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares
of Warrant Stock then outstanding (the "Demanding Holders") that the Company
file a registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for
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an offering on a delayed or continual basis pursuant to Rule 415 under the
Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration, the
Company shall:
(1) File the requested registration statement with the Commission
as promptly as practicable, and shall use all commercially reasonable
efforts to have the registration declared effective under the Securities
Act as soon as reasonably practicable, in each instance giving due regard
to the need to prepare and file current financial statements, conduct due
diligence and complete other actions that are reasonably necessary to
effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand
Registration, for up to 90 days or until such earlier date as of which
all Registrable Securities covered by such registration statement shall
have been disposed of in the manner described in the registration
statement, and (y) if a Shelf Registration, for 270 days.
Notwithstanding the foregoing, if for any reason the effectiveness of a
Demand Registration is suspended or postponed as permitted by Subsection
(d) below, the foregoing period shall be extended by the aggregate number
of days of such suspension or postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not
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satisfied or waived, other than by reason of a failure on the part of the
Selling Holders. If the Company shall have complied with its obligations under
this Section 9, a right to demand a registration pursuant to this Section 9.2
shall be deemed to have been satisfied (i) if a Demand Registration other than
a Shelf Registration, upon the earlier of (x) the date as of which all of the
Registrable Securities included therein shall have been disposed of pursuant to
the registration statement and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of 90 days,
and (ii) if a Shelf Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or
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"all reasonable efforts" basis or otherwise), or an agented offering, the
Majority Selling Holders shall have the right to select the underwriter or
underwriters and manager or managers to administer such underwritten offering
or the placement agent or agents for such agented offering from among the
entities listed in Schedule B hereto (or any successors of any such entities),
it being understood that the Majority Selling Holders shall use commercially
reasonable efforts to select one or more of the first three listed entities
subject to arriving at reasonably acceptable terms and conditions for the
offering.
(f) The Company may elect to include shares of Common Stock to be sold for
its account in any such Demand Registration (including a Shelf Registration);
provided, however, if the managing underwriter shall advise the Demanding
Holders in writing (with a copy to the Company) that, in its opinion, the
number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be realized
therefor, or the timing thereof, then the number of shares proposed to be
included in such Demand Registration by the Company shall be reduced, to such
number that the Demanding Holders are advised can be sold without such effect
in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders of the Company other than the WS Holders) equity securities under
the Securities Act in connection with the public offering solely for cash on
Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall
promptly give each WS Holder written notice of such registration (a "Piggyback
Registration"). Upon the written request of each WS Holder given within 20
days following the date of such notice, the Company shall cause to be included
in such registration statement and use its best efforts to be registered under
the Securities Act all the Registrable Securities that each such WS Holder
shall have requested to be registered. The Company shall have the absolute
right to withdraw or cease to prepare or file any registration statement for
any offering referred to in this Section 9.3 without any obligation or
liability to any WS Holder.
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(b) If the managing underwriter shall advise the Company in writing (with
a copy to each Selling Holder) that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, or the timing thereof, then the Company will
include in such registration, to the extent of the amount and class which the
Company is so advised can be sold without such material adverse effect in such
offering: first, all securities proposed to be sold by the Company for its own
account; and second, the Warrant Stock requested to be included in such
registration by WS Holders and all other securities requested to be included in
such registration by Persons other than the Company and WS Holders, the
securities covered by this clause second to be included pro rata based on the
estimated gross proceeds from the sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable Securities
included in an unlimited number of Piggyback Registrations pursuant to this
Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement
with respect to such Warrant Stock and use the Company's best efforts to
cause such registration statement to become effective; provided, however,
that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by
reference after the initial filing of the registration statement and
prior to effectiveness thereof, the Company shall furnish to one firm of
counsel for the Selling Holders (selected by Majority Selling Holders)
copies of all such documents in the form substantially as proposed to be
filed with the Commission at least four Business Days prior to filing for
review and comment by such counsel, which opportunity to comment shall
include an absolute right to control or contest disclosure if the
applicable Selling Holder reasonably believes that it may be subject to
controlling person liability under applicable securities laws with
respect thereto.
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(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with
respect to the disposition of all securities covered by such registration
statement. If the registration is for an underwritten offering, the
Company shall amend the registration statement or supplement the
prospectus whenever required by the terms of the underwriting agreement
entered into pursuant to Section 9.4(e). Subject to Rule 415 under the
Securities Act, if the registration statement is a Shelf Registration,
the Company shall amend the registration statement or supplement the
prospectus so that it will remain current and in compliance with the
requirements of the Securities Act for 270 days or after its effective
date, and if during such period any event or development occurs as a
result of which the registration statement or prospectus contains a
misstatement 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, the Company shall promptly notify each Selling Holder,
amend the registration statement or supplement the prospectus so that
each will thereafter comply with the Securities Act and furnish to each
Selling Holder of Registrable Securities such amended or supplemented
prospectus, which each such Holder shall thereafter use in the Transfer
of Warrant Stock covered by such registration statement. Pending such
amendment or supplement each such Selling Holder shall cease making
offers or Transfers of Registerable Securities pursuant to the prior
prospectus. In the event that any Registrable Securities included in a
registration statement subject to, or required by, this Warrant remain
unsold at the end of the period during which the Company is obligated to
use its best efforts to maintain the effectiveness of such registration
statement, the Company may file a post-effective amendment to the
registration statement for the purpose of removing such Registrable
Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities,
without charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each
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preliminary prospectus and any amendments or supplements thereto, in each
case in conformity with the requirements of the Securities Act and the
rules thereunder, and such other related documents as any such Selling
Holder may reasonably request in order to facilitate the disposition of
Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states or jurisdictions as
shall be reasonably requested by the managing underwriter (as applicable,
or if inapplicable, the Majority Selling Holders), and (ii) to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or
exemption from qualification) of the offer and transfer of any of the
Registrable Securities in any jurisdiction, at the earliest possible
moment; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not
be required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
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(g) Make generally available to the Company's security holders
copies of all periodic reports, proxy statements, and other information
referred to in Section 9.9(a) and an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later than 90 days
following the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of each registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of
such Selling Holder and underwriter (but not more than one firm of
counsel to such Selling Holders), all financial and other information as
shall be reasonably requested by them, and provide the Selling Holder,
any underwriter participating in such offering and the representatives of
such Selling Holder and underwriter the opportunity to discuss the
business affairs of the Company with its principal executives and
independent public accountants who have certified the audited financial
statements included in such registration statement, in each case all as
necessary to enable them to exercise their due diligence responsibility
under the Securities Act; provided, however, that information that the
Company determines, in good faith, to be confidential and which the
Company advises such Person in writing, is confidential shall not be
disclosed unless such Person signs a confidentiality agreement reasonably
satisfactory to the Company or the related Selling Holder of Registrable
Securities agrees to be responsible for such Person's breach of
confidentiality on terms reasonably satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of
the type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company
shall furnish to each Selling Holder a signed counterpart of any such
comfort letter or legal opinion. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written
representations or acknowledgments as are customarily
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provided by selling shareholders who receive such comfort letters or
opinions.
(j) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a recognized
trading market, to continue to be so listed or included for a reasonable
period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations
of the Company to enable the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number
for the Common Stock prior to the effective date of the first
registration statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 9
with respect to the Registrable Securities of any Selling Holder that such
Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Selling Holder's Registrable Securities,
and to cooperate with the Company in preparing such registration; and
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(ii) Agree to sell their Registrable Securities to the underwriters
at the same price and on substantially the same terms and conditions as
the Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and to
execute the underwriting agreement agreed to by the Majority Selling
Holders (in the case of a registration under Section 9.2) or the Company
and the Majority Selling Holders (in the case of a registration under
Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of
such Selling Holder's shares registered for sale pursuant to this Section
9; provided, however, it is understood that any failure so to notify the
Company shall not be deemed a default hereunder or to subject any Selling
Holder to any claim for damages or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection
with registrations under this Section 9 shall be allocated and paid as
follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of
one firm of counsel for the Selling Holders of Registrable Securities
(the "Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense),
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unless WS Holders whose Registrable Securities constitutes a majority of
the Registrable Securities then outstanding agree that such withdrawn
registration shall constitute the exercise of their one demand
registration under Section 9.2 hereof. The counsel for the Selling
Holders shall be selected by Demanding Holders owning a majority of the
Registrable Securities owned by Demanding Holders to be included in a
Demand Registration and, in the case of a Piggyback Registration, by
Selling Holders owning a majority of the Registrable Securities to be
included in such registration; provided that in the case of a Piggyback
Registration, the Selling Holders shall use one firm of counsel to
represent all such holders and shall endeavor in good faith, with any
other holders of securities to be included in such registration, to
select one firm of counsel to represent all such selling securities
holders.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to
Section 9.3 for each Selling Holder, but excluding underwriting discounts
and commissions relating to Registrable Securities (which shall be paid
on a pro rata basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act,
and each officer, director, partner, and employee of such Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may
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become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations pursuant to a final
non-appealable order (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein,
or any amendments or supplements thereto;
(ii) 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; or
(iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any applicable state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any applicable state securities
law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or expense to the extent that
it is determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation which occurred in reliance upon and in conformity with written
information furnished to the Company by the indemnified party expressly
for use in connection with such registration; provided, further, that the
indemnity agreement contained in this Section 9.7(a) shall not apply to
any underwriter to the extent that any such loss is based on or arises
out of an untrue statement or alleged untrue statement of a material
fact, or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the final
prospectus shall correct such untrue statement or
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alleged untrue statement, or such omission or alleged omission, and a
copy of the final prospectus has not been sent or given to such person at
or prior to the confirmation of sale to such person if such underwriter
was under an obligation to deliver such final prospectus and failed to do
so. The Company shall also indemnify underwriters, selling brokers,
dealer managers and similar securities industry professionals
participating in the distribution, their officers, directors, agents and
employees and each person who controls such persons (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) to
the same extent as provided above with respect to the indemnification of
the Selling Holders.
(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors,
each of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling
Holder, any controlling Person of any such other Selling Holder and each
officer, director, partner, and employee of such other Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses are determined by a court of competent
jurisdiction by a final non-appealable order to have solely arisen out of
or be based upon a Violation that occurred in reliance upon and in
conformity with written information furnished by such Selling Holder
expressly for use in connection with such registration; provided,
however, that (x) the indemnification required by this Section 9.7(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which
consent shall not be unreasonably withheld, and (y) in no event shall the
amount of any indemnity under this Section 9.7(b) exceed the net
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proceeds from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9.7 of notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing for which
such indemnified party may make a claim under this Section 9.7, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of
any such action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified
party under this Section 9.7 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 9.7. Any reasonable fees and expenses incurred
by the indemnified party (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within
thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such
indemnified party shall have the right to employ separate counsel in any
such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying party shall have
failed to promptly assume the
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<PAGE> 49
defense of such action, claim or proceeding or (iii) the named parties to
any such action, claim or proceeding (including any impleaded parties)
include both such indemnified party and the indemnifying party, and such
indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the
assertion of such defenses would create a conflict of interest such that
counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies
the indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection with any
one such action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the
reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred
to in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute
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to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or
relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or
other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault
of such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and
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<PAGE> 51
when bills are received or expense, loss, damage or liability is
incurred. In the event that it shall be subsequently determined that the
recipient of any such periodic payment shall not be entitled to
indemnification hereunder, such recipient promptly shall repay such
payments, together with interest thereon at the Agreed Rate from the date
of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the
completion of any offering of Registrable Securities pursuant to a
registration statement under this Section 9, and otherwise.
9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to
have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities
or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or agented
registration), during the 5-day period prior to, and during the 45-day period
beginning on, the date such registration statement is declared effective under
the Securities Act by the Commission, provided that such WS Holder is timely
notified of such effective date in writing by the Company or such managing
underwriter.
9.9. Additional Covenants of the Company. The Company hereby agrees and
covenants as follows:
(a) The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If
the Company is not required to file reports pursuant to the Exchange Act,
upon the request of any WS Holder, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of
the Securities Act, and take such further action as may be reasonably
required from time to time and as may be within the reasonable control of
the Company, to enable the WS Holders to Transfer Warrants or Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the
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<PAGE> 52
Securities Act or any similar rule or regulation hereafter adopted by the
Commission. In addition, promptly upon the request of any WS Holder, the
Company shall provide such WS Holder with such publicly available
financial statements, reports and other information as may be required to
permit such WS Holder to Transfer shares of Registrable Securities to
Qualified Institutional Investors pursuant to Rule 144A of the Securities
Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Common Stock, Convertible Securities or Stock Purchase Rights during the
5 Business Days prior to, and during the 90-day period beginning on, the
commencement of a public distribution of Registrable Securities pursuant
to any registration statement prepared pursuant to this Section 9 (other
than by the Company pursuant to such registration if the registration is
pursuant to Section 9.3 or by the Company pursuant to any dividend
reinvestment plan offered by it to its stockholders). The Company shall
not effect any registration of its securities (other than on Form S-4,
Form S-8, or any successor forms to such forms or pursuant to such other
registration rights agreements as may be approved in writing by the
Majority Selling Holders) or effect any public or private sale or
distribution of any of its securities, including a sale pursuant to
Regulation D under the Securities Act, whether on its own behalf or at
the request of any holder or holders of such securities from the date of
a request for a Demand Registration pursuant to Section 9.2 until 90 days
following the effective date of such Demand Registration statement,
unless the Company shall have previously notified in writing all Selling
Holders of the Company's desire to do so, and the Majority Selling
Holders or the managing underwriter, if any, shall have consented thereto
in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant
to which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or
other agreement) shall contain a provision whereby any holder receiving
such Common Stock who will hold more than one
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<PAGE> 53
percent (1%) of the amount of such Common Stock then outstanding shall
agree not to effect any public sale or distribution of any such Common
Stock during the periods described in the second sentence of Section
9.9(b), in each case including a sale pursuant to Rule 144 under the
Securities Act (unless such Person is prevented by applicable statute or
regulation from entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer
or agree to Transfer all or substantially all the Company's assets,
unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively,
shall have agreed in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which
the WS Holders would be entitled to receive in exchange for Registrable
Securities pursuant to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of Fleet National Bank shall be a sufficient indemnity) and, in case of
mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, in the case of mutilation, no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
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As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular and
periodic reports, proxy statements (other than preliminary) and
registration statements (other than registration statements on Forms S-3
(relating to debt securities) and S-8) which the Company may file with
the Securities and Exchange Commission or any governmental agency
substituted therefor.
(ii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
or made available by the Company to the holders of any class of
its securities generally or by any Subsidiary of the Company to
the holders of any class of its securities generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
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13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice (the
"Call Notice") to the Holders of all outstanding Warrants given at any time on
or after the date of the occurrence of the Triggering Event and before May 31,
1997, to repurchase on the date specified in the notice from each Holder of a
Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series A Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series A Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender of
this Warrant at the Designated Office against payment of the repurchase price
therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
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or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss, cost,
damage, reasonable attorneys' and accountants' fees and expenses, court costs
and all other out-of-pocket expenses incurred in connection with or arising
from a Company Default. This indemnification provision shall be in addition to
the rights of such Holder or Holders to bring an action against the Company for
breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this War-
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rant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provisions of Sections 3.1,
8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock
issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
14.7. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such
Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the written consent of the Holder thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND
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<PAGE> 58
PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT,
THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF
THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED
BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH
BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT
IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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<PAGE> 59
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is ___________________________________________
and, if such shares of Common Stock shall not include all of the shares
of Common Stock issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the shares of Common Stock issuable
hereunder be delivered to the undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.4
=================================================================
SERIES A WARRANT
to Purchase Common Stock of
NORAND CORPORATION
=================================================================
Warrant No. A - 4
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 14
3.1. Transfer 14
3.2. Division and Combination. 14
3.3. Expenses. 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and
Convertible Securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under
this Section 21
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions. 23
7.2 Closing of Transfer Books. 23
8. TRANSFER RESTRICTIONS 24
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures. 30
9.5. Selling Holders' Obligations. 34
9.6. Expenses of Registration. 34
9.7. Indemnification; Contribution. 35
9.8. Holdback. 40
9.9. Additional Covenants of the Company 40
10.LOSS OR MUTILATION 42
11.OFFICE OF THE COMPANY 42
12.FINANCIAL AND BUSINESS INFORMATION 43
13.REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver. 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability. 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment. 45
14.8. Severability 45
14.9. Headings. 45
14.10. GOVERNING LAW; JURISDICTION. 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
SCHEDULE B UNDERWRITERS AND AGENTS
-ii-
<PAGE> 4
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY
OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE
TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION
OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT
OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER
THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE
PROPOSED TRANSFER.
Warrant No. A - 4
SERIES A WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT THE DAIWA BANK, LIMITED, or registered assigns,
is entitled, at any time after May 31, 1997 and prior to the Expiration Date
(such term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from NORAND CORPORATION, a Delaware corporation (the
"Company"), Thirty-eight Thousand Two Hundred Fifteen (38,215) shares of the
Common Stock of the Company (subject to adjustment as provided herein), at a
purchase price of $21.15 per share (the initial "Exercise Price", subject to
adjustment as provided herein), all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
<PAGE> 5
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any
class of voting stock of such Person and has the power to vote such
shares or (c) more than ten percent of the outstanding shares of any
class of voting stock (or, in the case of a Person which is not a
corporation, more than ten percent of the equity interest) of which is
beneficially owned or held by such Person and such Person has the power
to vote such shares or equity interest. The term "control" as used with
respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate
base rate of interest announced by The First National Bank of Chicago
from time to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined
by an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and
conditions for the
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appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination
of Appraised Value shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company
taken as a whole, based on the higher of (A) the value derived from a
hypothetical sale of the entire Company as a going concern by a willing
seller to a willing buyer (neither acting under any compulsion) and (B)
the liquidation value of the entire Company. No discount shall be
applied on account of (i) any Warrants or Warrant Stock representing a
minority interest, (ii) any lack of liquidity of the Common Stock or the
Warrants, (iii) the fact that the Warrants or Warrant Stock may
constitute "restricted securities" for securities law purposes or (iv)
the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.5 hereof) received by or distributed to the holders
of Common Stock of the Company in the circumstances contemplated by
Section 4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the
Company to comply in any material respect with any covenant of the
Company contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and
available for Transfers of Warrant Stock thereunder for the longer of
either (i) any ten consecutive Business Days, or (ii) an aggregate of
fifteen Business Days during the period specified in the relevant
provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or
exchangeable for, with or without payment of additional consideration in
cash or property, shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the
Lenders party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for
the shorter of (x) the twenty consecutive Business Days immediately
preceding such date or (y) the period commencing on the Business Day next
following the first public announcement of any event giving rise to an
adjustment of the Exercise Price pursuant to Section 4 below
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and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a
National Market System security, the last sale price, regular way, on
such day on the principal stock exchange or market system on which such
Common Stock is then listed or admitted to trading, or, if no such sale
takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day as reported on such stock exchange or
market system or (ii) if the Common Stock is not then listed or admitted
to trading on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter,
the average of the closing bid and asked prices for the Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National
Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section
9.2(a) hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms
of which equity capital are acceptable to the Majority Warrant Holders)
raised by and/or contributed to the Company subsequent to the Original
Issue Date or new Indebtedness (as defined in the Credit Agreement)
subordinated to the Obligations (as defined in the Credit Agreement),
provided the terms of such Indebtedness (including, without limitation,
maturity, amortization, covenants, defaults, remedies and subordination
provisions) are acceptable to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time
to time.
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"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to
Section 4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under
the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date
shall mean (A) if the Common Stock is publicly traded on such date, the
Current Market Price per share or (B) if the Common Stock is not publicly
traded on such date, (1) the fair market value per share of Common Stock
as determined in good faith by the Board of Directors of the Company and
set forth in a written notice to each Holder or (2) if the Majority
Warrant Holders object in writing to such price as determined by the
Board of Directors within thirty days after receiving notice of same, the
Appraised Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to
be determined, all shares of Common Stock Outstanding on such date and
all shares of Common Stock issuable in respect of (x) the Warrants
outstanding on such date, (y) any Convertible Securities outstanding on
such date and (z) any other Stock Purchase Rights outstanding on such
date, in each case regardless of whether or not the conversion, exchange,
subscription or purchase rights associated with such Convertible
Securities or Stock Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or
entailing a finding, that the Company is insolvent or bankrupt, or
seeking reorganization, liquidation, dissolution, winding-up, charter
revocation or other similar relief with respect to the Company or any of
its properties, assets or debts, or seeking the appointment of a
receiver, trustee, custodian, liquidator, sequestrator or similar
official for the Company or any of its properties or assets, or the
Company becoming insolvent or bankrupt or generally unable to pay its
debts as they become due, or the Company voluntarily suspending its
business or making a general assignment for the benefit of creditors;
provided that an Insolvency Event shall not be deemed to have occurred on
account of any such proceeding which is involuntary on the part of the
Company unless same shall not have been dismissed or stayed within 60
days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement perfecting a security interest under the
Uniform Commercial Code or comparable law of any jurisdiction).
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"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock
(with any such Warrants being deemed to represent, for the purposes of
such calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced
in Securities Act or bank regulatory matters, as the case may be, chosen
by the Holder of this Warrant or Warrant Stock issued upon the exercise
hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary thereof, and shall
include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Outstanding", when used with respect to Warrant Stock for the purposes
of Section 9 hereof shall have the meaning set forth in Section 9.1(d)
hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth
in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Holders" shall mean, with respect to a specified
registration under Section 9 hereof, WS Holders whose Registrable
Securities are included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with,
and having the same terms (other than the number of shares purchasable
upon the exercise thereof) as, this Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with this
Warrant.
"Settlement Stock" shall mean the shares of Common Stock
contemplated to be issued in settlement of the pending shareholders'
claims against the Company with respect to the litigation styled In re
Norand Corporation Securities Litigation, Master File No. C95-323,
pending in the United States District Court for the Northern District of
Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in Section
2.1(c) hereof.
"Shelf Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after
the Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the
Warrants and any issuance of Common Stock, Convertible Securities
or Stock Purchase Rights (and
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any issuance of Common Stock pursuant to the conversion, exchange
or exercise of any such Convertible Securities or Stock Purchase
Rights) deemed to have been issued as of the Original Issue Date
pursuant to the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant
(other than warrants granted to Jay Alix and Associates and to
Donald W. Rowley for up to the respective number of shares set
forth on Schedule A) granted or issued after the Original Issue
Date shall not be less than the "daily market price" (as that term
is defined in the definition of Current Market Price) of the Common
Stock on the date of grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) The issuance of Common Stock or Convertible Securities
directly related to the Company's receipt of Equity if, and only
if, the aggregate Equity actually received by the Company between
the Original Issue Date and August 31, 1997 equals or exceeds $20
million (otherwise, after August 31, 1997, all such issuances, both
prior to and after August 31, 1996, shall be considered a
Subsequent Issuance for purposes of Section 4 hereof).
(v) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights with respect to which the
Majority Warrant Holders shall have waived application of the
provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or
more Subsidiaries, or any other business entity in which the Company or
one or more Subsidiaries or the Company and one or more Subsidiaries own
more than a 50% interest either in the
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profits or capital of such business entity or (b) whose net earnings, or
portions thereof, are consolidated with the net earnings of the Company
and are recorded on the books of the Company for financial reporting
purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a
"sale" thereof within the meaning of the Securities Act.
"Triggering Event" shall mean the repayment in full of all
indebtedness under the Credit Agreement.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as
of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise
of Warrants until such time as such shares of Common Stock have either
been (i) Transferred in a public offering pursuant to a registration
statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof with all
transfer restrictions and restrictive legends with respect to such Common
Stock being removed in connection with such transaction. "Warrant
Stock", for the purposes of Section 9 hereof, shall have the meaning set
forth in Section 9.1(b) hereof.
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"WS Holder" shall have the meaning set forth in Section 9.1(a)
hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00
P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from
time to time exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder (as determined
pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or
in part, the Holder shall (i) deliver to the Company at the Designated Office a
written notice of the Holder's election to exercise this Warrant (an "Exercise
Notice"), which Exercise Notice shall be irrevocable and specify the number of
shares of Common Stock to be purchased, together with this Warrant and (ii) pay
to the Company the Warrant Price (the date on which both such delivery and
payment shall have first taken place being hereinafter sometimes referred to as
the "Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly
executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
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(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current Market Price equal to such Warrant Price or(iv) by delivery
of a Note, duly endorsed by or accompanied by appropriate instruments of
transfer duly executed by the Holder or by the Holder's attorney duly
authorized in writing. In the event of any withholding of Warrant Stock or
surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Current Market Price is equal to the Warrant Price is
not a whole number, the number of shares withheld by or surrendered to the
Company shall be rounded up to the nearest whole share and the Company shall
make a cash payment to the Holder based on the incremental fraction of a share
being so withheld by or surrendered to the Company in an amount determined in
accordance with Section 2.3 hereof. For the purpose of making payment of the
Warrant Price, any Note surrendered to the Company shall be deemed to have a
value equal to 100% of the principal amount thereof plus any interest accrued
but unpaid thereon. If the Holder delivers a Note with a deemed value that
exceeds the Warrant Price, the Company shall reissue to the Holder a new Note
identical in all respects to the surrendered Note except that the principal
amount of such new Note shall be equal to the principal amount that, together
with any interest accrued but unpaid thereon, is equal to the deemed value of
the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassess-
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able, issued without violation of any preemptive rights and free and clear of
all Liens (other than any created by actions of the Holder). The Company shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder and the Company shall reimburse
the Holder therefor on an After-Tax Basis.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
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2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything
in this Warrant to the contrary, the Holder of this Warrant, if subject to the
Bank Holding Company Act or any provision of the Glass-Steagall Act, may
exercise this Warrant only if the Notice of Exercise is accompanied by an
Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such clearances would be obtained or
make it likely that such clearances would, if obtained, contain material
conditions adverse to such Holder. In the event that federal or state
regulatory clearances are required prior to the exercise of this Warrant by the
Holder hereof, the Company shall reasonably cooperate with such Holder in
providing such information to any regulatory agency as such agency may
reasonably require. In the event any such regulatory clearance is withheld or
denied, such Holder may continue to hold this Warrant until its expiration or
may sell or otherwise transfer this Warrant in accordance with the terms
hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
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3.2. Division and Combination. Subject to compliance with the applicable
provisions of this Warrant, this Warrant may be divided or combined with other
Warrants upon presentation hereof at the Designated Office, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with the applicable provisions of this Warrant as to any transfer
which may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense any new Warrant or Warrants required to be issued under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the
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number of shares of Common Stock Outstanding immediately prior to the
adjustment and the denominator of which is equal to the number of shares of
Common Stock Outstanding immediately after such adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If at any time
the Company shall issue or sell any shares of Common Stock in a Subsequent
Issuance for a consideration per share that is less than the Exercise Price in
effect immediately prior to such issuance or sale, then, forthwith upon such
issuance or sale, the Exercise Price shall be reduced to a price calculated by
dividing (1) an amount equal to the sum of (x) the number of shares of Common
Stock Outstanding immediately prior to such Subsequent Issuance multiplied by
the then existing Exercise Price, plus (y) the aggregate consideration
(determined in accordance with the provisions of Section 4.6 hereof), if any,
received by the Company in connection with such Subsequent Issuance, by (2) the
total number of shares of Common Stock Outstanding immediately after such
Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a)
In the event that the Company shall at any time issue, sell or grant any Stock
Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose
of Section 4.2 above, the Company shall be deemed to have issued at that time a
number of shares of Common Stock equal to the maximum number of shares of
Common Stock (without giving effect to any antidilution provisions in such
Stock Purchase Rights) that are or may become issuable upon exercise of such
Stock Purchase Rights (or upon exercise of any Convertible Securities issuable
upon exercise of such Stock Purchase Rights) for a consideration per share
equal to (i) the aggregate consideration per share (determined in accordance
with the provisions of Section 4.6 hereof) received by the Company in
connection with the issuance, sale or grant of such Stock Purchase Rights plus
(ii) the minimum
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amount of such consideration per share receivable by the Company in connection
with the exercise of such Stock Purchase Rights (and the exercise of any
Convertible Securities issuable upon exercise of such Stock Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such Convertible Securities for a
consideration per share equal to (i) the aggregate consideration per share
(determined in accordance with the provisions of Section 4.6 hereof) received
by the Company in connection with the issuance or sale of such Convertible
Securities plus (ii) the minimum amount of such consideration per share
receivable by the Company in connection with the exercise of such conversion or
exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or
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<PAGE> 23
Convertible Securities, any of such Stock Purchase Rights or the rights of
conversion or exchange associated with such Convertible Securities shall expire
by their terms or any of such Stock Purchase Rights or Convertible Securities
shall be repurchased by the Company or a Subsidiary thereof for a consideration
per underlying share of Common Stock not exceeding the amount of such
consideration received by the Company in connection with the issuance, sale or
grant of such Stock Purchase Rights or Convertible Securities, the Exercise
Price then in effect shall forthwith be increased to the Exercise Price that
would have been in effect if such expiring Stock Purchase Rights or rights of
conversion or exchange or such repurchased Stock Purchase Rights or Convertible
Securities had never been issued. Similarly, if at any time after any such
adjustment of the Exercise Price shall have been made pursuant to Section 4.2
(i) any additional consideration is received or becomes receivable by the
Company in connection with the issuance or exercise of such Stock Purchase
Rights or Convertible Securities or (ii) there is a reduction in the conversion
ratio applicable to such Convertible Securities so that fewer shares of Common
Stock will be issuable upon the conversion or exchange thereof or there is a
decrease in the number of shares of Common Stock issuable upon exercise of such
Stock Purchase Rights, the Exercise Price then in effect shall be forthwith
readjusted to the Exercise Price that would have been in effect had such
changes taken place at the time that such Stock Purchase Rights or Convertible
Securities were initially issued, granted or sold. In no event shall any
readjustment under this Section 4.3(d) affect the validity of any shares of
Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of
the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such
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<PAGE> 24
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
4.5. Reorganization, Reclassification, Merger, Con solidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Holder of this Warrant shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In such event, the
aggregate Exercise Price otherwise payable for the shares of Common Stock
issuable upon exercise of this Warrant shall be allocated among the shares of
common stock and Other Property receivable as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modi-
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<PAGE> 25
fications as may be reasonably deemed appropriate (as determined by resolution
of the Board of Directors of the Company) in order to provide for adjustments
of any shares of the common stock of such successor or acquiring corporation
for which this Warrant thus becomes exercisable, which modifications shall be
as equivalent as practicable to the adjustments provided for in this Section 4.
For purposes of this Section 4.5, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class that is not
preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. Determination of Consideration. For purposes of Sections 4.2,
4.3 and 4.4 hereof, the consideration received and/or receivable by the Company
in connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount received by the
Company after deduction of any accrued interest or dividends, expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Company.
(2) Securities or Other Property. In the case of securities or other
property, the fair market value thereof as of the date immediately
preceding such issuance, sale, grant or exercise as determined in good
faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares of Common
Stock are issued or sold together with other securities or other assets of
the Company for a consideration which covers both, the
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consideration received (computed as provided in (1) and (2) above)
shall be allocable to such shares of Common Stock as determined in
good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or
Convertible Securities shall be issued or sold together with other
securities or other assets of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to the Stock Purchase Rights or Convertible Securities,
the consideration allocable to such Stock Purchase Rights or
Convertible Securities shall be determined in good faith by the
Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or
Convertible Securities, such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or
sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the
fair value on the date of issuance of such security of such
portion of the assets and business of the non-surviving
corporation attributable to such Common Stock, Stock Purchase
Rights or Convertible Securities, as is determined in good faith
by the Company's Board of Directors.
(7) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good faith
by the
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<PAGE> 27
Majority Warrant Holders, and any dispute shall be resolved by an
investment banking or appraisal firm of recognized national
standing selected by the Company and reasonably acceptable to the
Majority Warrant Holders and whose decision shall be binding on
the Company and all holders of Warrants. The fees and expenses of
such firm shall be paid by the party or parties whose position is
not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential intent and
principles hereof (including, without limitation, the issuance of securities
other than Common Stock which have the right to participate in distributions to
the holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
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<PAGE> 28
4.8. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase
Rights, then all references in this Section 4 to the date of the issuance
or sale of such shares of Common Stock, Convertible Securities or Stock
Purchase Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1
above, at no time shall the Exercise Price per share of Common Stock
exceed the amount set forth in the first paragraph of the preamble of
this Warrant.
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<PAGE> 29
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock
to be less than the Exercise Price that would result from such
transaction.
(g) Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to this Section 4, the Company
shall forthwith prepare a certificate to be executed by the
President or chief financial officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated, specifying the
number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section
4.5) describing the number and kind of any other shares of stock
or Other Property for which this Warrant is exercisable, and any
related change in the Exercise Price, after giving effect to such
adjustment or change. The Company shall promptly cause a signed
copy of such certificate to be delivered to each Holder in
accordance with Section 15.2. The Company shall keep at its
principal office or at the Designated Office, if different, copies
of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any
Holder or any prospective transferee of a Warrant designated by a
Holder thereof.
(h) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an
event occurs that requires the application of more than one
subsection, all applicable subsections shall be given independent
effect without duplication.
5. NO IMPAIRMENT
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<PAGE> 30
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or reasonably appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company shall take all such action as may be
necessary or reasonably appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all Liens, and shall use all
commercially reasonably efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or
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(b) any amendment of the Certificate of Incorporation of the Company, the
Company shall mail to each Holder of a Warrant in accordance with the
provisions of Section 14.2 hereof a notice specifying the date or expected date
on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for the securities
or Other Property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer or disposition, and a
description in reasonable detail of the transaction. Such notice shall be
mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of
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Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion
of Counsel to the effect that such legend is not required for the purposes of
compliance with the Securities Act. Holders of the Warrants or the Restricted
Common Stock, as the case may be, shall not be entitled to Transfer such
Warrants or such Restricted Common Stock except in accordance with this Section
8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS
(A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
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<PAGE> 33
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Not withstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company, at the expense of the
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Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the Holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series B Warrants and the
holders of Warrant Stock (as defined in Section 9.1(b)) are collectively
referred to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series B Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with
respect to such Common Stock being removed in connection with such
transaction,(ii) any other securities issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in
exchange by the Company generally for, or in replacement by the Company
generally
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of, any shares of Warrant Stock and (iii) any securities issued in
exchange for any such Warrant Stock in any merger or reorganization of
the Company, but in the cases of clauses (ii) and (iii) only so long as
such securities have not been registered and Transferred pursuant to the
Securities Act or Transferred in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect to such securities are removed in
connection with such Transfer.
(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series B Warrants held
by such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total
number of shares of Warrant Stock Outstanding as of such date plus (ii)
the number of shares of Warrant Stock issuable upon exercise of all
outstanding Warrants and Series B Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series B
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives at any
time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares
of Warrant Stock then outstanding (the "Demanding Holders") that the Company
file a registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for
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an offering on a delayed or continual basis pursuant to Rule 415 under the
Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration, the
Company shall:
(1) File the requested registration statement with the Commission as
promptly as practicable, and shall use all commercially reasonable
efforts to have the registration declared effective under the Securities
Act as soon as reasonably practicable, in each instance giving due regard
to the need to prepare and file current financial statements, conduct due
diligence and complete other actions that are reasonably necessary to
effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand
Registration, for up to 90 days or until such earlier date as of which
all Registrable Securities covered by such registration statement shall
have been disposed of in the manner described in the registration
statement, and (y) if a Shelf Registration, for 270 days.
Notwithstanding the foregoing, if for any reason the effectiveness of a
Demand Registration is suspended or postponed as permitted by Subsection
(d) below, the foregoing period shall be extended by the aggregate number
of days of such suspension or postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not
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satisfied or waived, other than by reason of a failure on the part of the
Selling Holders. If the Company shall have complied with its obligations under
this Section 9, a right to demand a registration pursuant to this Section 9.2
shall be deemed to have been satisfied (i) if a Demand Registration other than
a Shelf Registration, upon the earlier of (x) the date as of which all of the
Registrable Securities included therein shall have been disposed of pursuant to
the registration statement and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of 90 days,
and (ii) if a Shelf Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or
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"all reasonable efforts" basis or otherwise), or an agented offering, the
Majority Selling Holders shall have the right to select the underwriter or
underwriters and manager or managers to administer such underwritten offering
or the placement agent or agents for such agented offering from among the
entities listed in Schedule B hereto (or any successors of any such entities),
it being understood that the Majority Selling Holders shall use commercially
reasonable efforts to select one or more of the first three listed entities
subject to arriving at reasonably acceptable terms and conditions for the
offering.
(f) The Company may elect to include shares of Common Stock to be sold for
its account in any such Demand Registration (including a Shelf Registration);
provided, however, if the managing underwriter shall advise the Demanding
Holders in writing (with a copy to the Company) that, in its opinion, the
number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be realized
therefor, or the timing thereof, then the number of shares proposed to be
included in such Demand Registration by the Company shall be reduced, to such
number that the Demanding Holders are advised can be sold without such effect
in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders of the Company other than the WS Holders) equity securities under
the Securities Act in connection with the public offering solely for cash on
Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall
promptly give each WS Holder written notice of such registration (a "Piggyback
Registration"). Upon the written request of each WS Holder given within 20
days following the date of such notice, the Company shall cause to be included
in such registration statement and use its best efforts to be registered under
the Securities Act all the Registrable Securities that each such WS Holder
shall have requested to be registered. The Company shall have the absolute
right to withdraw or cease to prepare or file any registration statement for
any offering referred to in this Section 9.3 without any obligation or
liability to any WS Holder.
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(b) If the managing underwriter shall advise the Company in writing (with
a copy to each Selling Holder) that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, or the timing thereof, then the Company will
include in such registration, to the extent of the amount and class which the
Company is so advised can be sold without such material adverse effect in such
offering: first, all securities proposed to be sold by the Company for its own
account; and second, the Warrant Stock requested to be included in such
registration by WS Holders and all other securities requested to be included in
such registration by Persons other than the Company and WS Holders, the
securities covered by this clause second to be included pro rata based on the
estimated gross proceeds from the sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable Securities
included in an unlimited number of Piggyback Registrations pursuant to this
Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement
with respect to such Warrant Stock and use the Company's best efforts to
cause such registration statement to become effective; provided, however,
that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by
reference after the initial filing of the registration statement and
prior to effectiveness thereof, the Company shall furnish to one firm of
counsel for the Selling Holders (selected by Majority Selling Holders)
copies of all such documents in the form substantially as proposed to be
filed with the Commission at least four Business Days prior to filing for
review and comment by such counsel, which opportunity to comment shall
include an absolute right to control or contest disclosure if the
applicable Selling Holder reasonably believes that it may be subject to
controlling person liability under applicable securities laws with
respect thereto.
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(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with
respect to the disposition of all securities covered by such registration
statement. If the registration is for an underwritten offering, the
Company shall amend the registration statement or supplement the
prospectus whenever required by the terms of the underwriting agreement
entered into pursuant to Section 9.4(e). Subject to Rule 415 under the
Securities Act, if the registration statement is a Shelf Registration,
the Company shall amend the registration statement or supplement the
prospectus so that it will remain current and in compliance with the
requirements of the Securities Act for 270 days or after its effective
date, and if during such period any event or development occurs as a
result of which the registration statement or prospectus contains a
misstatement 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, the Company shall promptly notify each Selling Holder,
amend the registration statement or supplement the prospectus so that
each will thereafter comply with the Securities Act and furnish to each
Selling Holder of Registrable Securities such amended or supplemented
prospectus, which each such Holder shall thereafter use in the Transfer
of Warrant Stock covered by such registration statement. Pending such
amendment or supplement each such Selling Holder shall cease making
offers or Transfers of Registerable Securities pursuant to the prior
prospectus. In the event that any Registrable Securities included in a
registration statement subject to, or required by, this Warrant remain
unsold at the end of the period during which the Company is obligated to
use its best efforts to maintain the effectiveness of such registration
statement, the Company may file a post-effective amendment to the
registration statement for the purpose of removing such Registrable
Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities,
without charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each
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preliminary prospectus and any amendments or supplements thereto, in each
case in conformity with the requirements of the Securities Act and the
rules thereunder, and such other related documents as any such Selling
Holder may reasonably request in order to facilitate the disposition of
Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states or jurisdictions as
shall be reasonably requested by the managing underwriter (as applicable,
or if inapplicable, the Majority Selling Holders), and (ii) to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or
exemption from qualification) of the offer and transfer of any of the
Registrable Securities in any jurisdiction, at the earliest possible
moment; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not
be required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
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(g) Make generally available to the Company's security holders
copies of all periodic reports, proxy statements, and other information
referred to in Section 9.9(a) and an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later than 90 days
following the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of each registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of
such Selling Holder and underwriter (but not more than one firm of
counsel to such Selling Holders), all financial and other information as
shall be reasonably requested by them, and provide the Selling Holder,
any underwriter participating in such offering and the representatives of
such Selling Holder and underwriter the opportunity to discuss the
business affairs of the Company with its principal executives and
independent public accountants who have certified the audited financial
statements included in such registration statement, in each case all as
necessary to enable them to exercise their due diligence responsibility
under the Securities Act; provided, however, that information that the
Company determines, in good faith, to be confidential and which the
Company advises such Person in writing, is confidential shall not be
disclosed unless such Person signs a confidentiality agreement reasonably
satisfactory to the Company or the related Selling Holder of Registrable
Securities agrees to be responsible for such Person's breach of
confidentiality on terms reasonably satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of
the type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company
shall furnish to each Selling Holder a signed counterpart of any such
comfort letter or legal opinion. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written
representations or acknowledgments as are customarily
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provided by selling shareholders who receive such comfort letters or
opinions.
(j) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a recognized
trading market, to continue to be so listed or included for a reasonable
period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations
of the Company to enable the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number
for the Common Stock prior to the effective date of the first
registration statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 9
with respect to the Registrable Securities of any Selling Holder that such
Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Selling Holder's Registrable Securities,
and to cooperate with the Company in preparing such registration; and
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(ii) Agree to sell their Registrable Securities to the underwriters
at the same price and on substantially the same terms and conditions as
the Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and to
execute the underwriting agreement agreed to by the Majority Selling
Holders (in the case of a registration under Section 9.2) or the Company
and the Majority Selling Holders (in the case of a registration under
Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of
such Selling Holder's shares registered for sale pursuant to this Section
9; provided, however, it is understood that any failure so to notify the
Company shall not be deemed a default hereunder or to subject any Selling
Holder to any claim for damages or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of
one firm of counsel for the Selling Holders of Registrable Securities
(the "Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense),
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unless WS Holders whose Registrable Securities constitutes a majority of
the Registrable Securities then outstanding agree that such withdrawn
registration shall constitute the exercise of their one demand
registration under Section 9.2 hereof. The counsel for the Selling
Holders shall be selected by Demanding Holders owning a majority of the
Registrable Securities owned by Demanding Holders to be included in a
Demand Registration and, in the case of a Piggyback Registration, by
Selling Holders owning a majority of the Registrable Securities to be
included in such registration; provided that in the case of a Piggyback
Registration, the Selling Holders shall use one firm of counsel to
represent all such holders and shall endeavor in good faith, with any
other holders of securities to be included in such registration, to
select one firm of counsel to represent all such selling securities
holders.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to
Section 9.3 for each Selling Holder, but excluding underwriting discounts
and commissions relating to Registrable Securities (which shall be paid
on a pro rata basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable
Securities are included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act,
and each officer, director, partner, and employee of such Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may
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become subject under the Securities Act, the Exchange Act or
other federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations pursuant to a final
non-appealable order (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein,
or any amendments or supplements thereto;
(ii) 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; or
(iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any applicable state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any applicable state securities
law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or expense to the extent that
it is determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation which occurred in reliance upon and in conformity with written
information furnished to the Company by the indemnified party expressly
for use in connection with such registration; provided, further, that the
indemnity agreement contained in this Section 9.7(a) shall not apply to
any underwriter to the extent that any such loss is based on or arises
out of an untrue statement or alleged untrue statement of a material
fact, or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the final
prospectus shall correct such untrue statement or
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alleged untrue statement, or such omission or alleged omission, and a
copy of the final prospectus has not been sent or given to such person at
or prior to the confirmation of sale to such person if such underwriter
was under an obligation to deliver such final prospectus and failed to do
so. The Company shall also indemnify underwriters, selling brokers,
dealer managers and similar securities industry professionals
participating in the distribution, their officers, directors, agents and
employees and each person who controls such persons (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) to
the same extent as provided above with respect to the indemnification of
the Selling Holders.
(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors,
each of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling
Holder, any controlling Person of any such other Selling Holder and each
officer, director, partner, and employee of such other Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses are determined by a court of competent
jurisdiction by a final non-appealable order to have solely arisen out of
or be based upon a Violation that occurred in reliance upon and in
conformity with written information furnished by such Selling Holder
expressly for use in connection with such registration; provided,
however, that (x) the indemnification required by this Section 9.7(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which
consent shall not be unreasonably withheld, and (y) in no event shall the
amount of any indemnity under this Section 9.7(b) exceed the net
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proceeds from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9.7 of notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing for which
such indemnified party may make a claim under this Section 9.7, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of
any such action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified
party under this Section 9.7 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 9.7. Any reasonable fees and expenses incurred
by the indemnified party (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within
thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such
indemnified party shall have the right to employ separate counsel in any
such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying party shall have
failed to promptly assume the
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defense of such action, claim or proceeding or (iii) the named parties to
any such action, claim or proceeding (including any impleaded parties)
include both such indemnified party and the indemnifying party, and such
indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the
assertion of such defenses would create a conflict of interest such that
counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies
the indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection with any
one such action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the
reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred
to in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute
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to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or
relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or
other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault
of such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and
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when bills are received or expense, loss, damage or liability is
incurred. In the event that it shall be subsequently determined that the
recipient of any such periodic payment shall not be entitled to
indemnification hereunder, such recipient promptly shall repay such
payments, together with interest thereon at the Agreed Rate from the date
of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the
completion of any offering of Registrable Securities pursuant to a
registration statement under this Section 9, and otherwise.
9.8. Holdback. Each WS Holder entitled pursuant to this Section 9
to have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities or
Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or agented
registration), during the 5-day period prior to, and during the 45-day period
beginning on, the date such registration statement is declared effective under
the Securities Act by the Commission, provided that such WS Holder is timely
notified of such effective date in writing by the Company or such managing
underwriter.
9.9. Additional Covenants of the Company. The Company hereby
agrees and covenants as follows:
(a) The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If
the Company is not required to file reports pursuant to the Exchange Act,
upon the request of any WS Holder, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of
the Securities Act, and take such further action as may be reasonably
required from time to time and as may be within the reasonable control of
the Company, to enable the WS Holders to Transfer Warrants or Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the
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Securities Act or any similar rule or regulation hereafter adopted by the
Commission. In addition, promptly upon the request of any WS Holder, the
Company shall provide such WS Holder with such publicly available
financial statements, reports and other information as may be required to
permit such WS Holder to Transfer shares of Registrable Securities to
Qualified Institutional Investors pursuant to Rule 144A of the Securities
Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Common Stock, Convertible Securities or Stock Purchase Rights during the
5 Business Days prior to, and during the 90-day period beginning on, the
commencement of a public distribution of Registrable Securities pursuant
to any registration statement prepared pursuant to this Section 9 (other
than by the Company pursuant to such registration if the registration is
pursuant to Section 9.3 or by the Company pursuant to any dividend
reinvestment plan offered by it to its stockholders). The Company shall
not effect any registration of its securities (other than on Form S-4,
Form S-8, or any successor forms to such forms or pursuant to such other
registration rights agreements as may be approved in writing by the
Majority Selling Holders) or effect any public or private sale or
distribution of any of its securities, including a sale pursuant to
Regulation D under the Securities Act, whether on its own behalf or at
the request of any holder or holders of such securities from the date of
a request for a Demand Registration pursuant to Section 9.2 until 90 days
following the effective date of such Demand Registration statement,
unless the Company shall have previously notified in writing all Selling
Holders of the Company's desire to do so, and the Majority Selling
Holders or the managing underwriter, if any, shall have consented thereto
in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant
to which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or
other agreement) shall contain a provision whereby any holder receiving
such Common Stock who will hold more than one
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percent (1%) of the amount of such Common Stock then outstanding shall
agree not to effect any public sale or distribution of any such Common
Stock during the periods described in the second sentence of Section
9.9(b), in each case including a sale pursuant to Rule 144 under the
Securities Act (unless such Person is prevented by applicable statute or
regulation from entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer
or agree to Transfer all or substantially all the Company's assets,
unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively,
shall have agreed in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which
the WS Holders would be entitled to receive in exchange for Registrable
Securities pursuant to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of The Daiwa Bank, Limited shall be a sufficient indemnity) and, in case
of mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, in the case of mutilation, no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
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As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular and
periodic reports, proxy statements (other than preliminary) and
registration statements (other than registration statements on Forms S-3
(relating to debt securities) and S-8) which the Company may file with
the Securities and Exchange Commission or any governmental agency
substituted therefor.
(ii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
or made available by the Company to the holders of any class of
its securities generally or by any Subsidiary of the Company to
the holders of any class of its securities generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
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13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice (the
"Call Notice") to the Holders of all outstanding Warrants given at any time on
or after the date of the occurrence of the Triggering Event and before May 31,
1997, to repurchase on the date specified in the notice from each Holder of a
Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series A Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series A Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender of
this Warrant at the Designated Office against payment of the repurchase price
therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of the
Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
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or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss, cost,
damage, reasonable attorneys' and accountants' fees and expenses, court costs
and all other out-of-pocket expenses incurred in connection with or arising
from a Company Default. This indemnification provision shall be in addition to
the rights of such Holder or Holders to bring an action against the Company for
breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this War-
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<PAGE> 57
rant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provi sions of Sections
3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and, in the case of Section 9, all Holders of shares of Warrant
Stock issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
14.7. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such
Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the written consent of the Holder thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND
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<PAGE> 58
PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT,
THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF
THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED
BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH
BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT
IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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<PAGE> 59
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 61
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint _________________________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.5
=================================================================
SERIES A WARRANT
to Purchase Common Stock of
NORAND CORPORATION
=================================================================
Warrant No. A - 5
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 14
3.1. Transfer 14
3.2. Division and Combination 14
3.3. Expenses 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and
Convertible Securities 15
4.4. Adjustment of Number of Shares Purchasable 17
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets 17
4.6. Determination of Consideration 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under
this Section 21
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions 23
7.2 Closing of Transfer Books 23
8. TRANSFER RESTRICTIONS 24
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures 30
9.5. Selling Holders' Obligations 34
9.6. Expenses of Registration 34
9.7. Indemnification; Contribution 35
9.8. Holdback 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver
14.2. Notice Generally 43
14.3. Indemnification 44
14.4. Limitation of Liability 44
14.5. Remedies 44
14.6. Successors and Assigns 45
14.7. Amendment 45
14.8. Severability 45
14.9. Headings 45
14.10. GOVERNING LAW; JURISDICTION 45
45
ANNEX ASUBSCRIPTION FORM
48
ANNEX BASSIGNMENT FORM
49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
SCHEDULE B UNDERWRITERS AND AGENTS
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<PAGE> 4
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL
BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF
THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE
COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS
AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER
THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE
PROPOSED TRANSFER.
Warrant No. A - 5
SERIES A WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT NORWEST BANK IOWA, NATIONAL
ASSOCIATION, or registered assigns, is entitled, at any time after May 31, 1997
and prior to the Expiration Date (such term, and certain other capitalized
terms used herein being hereinafter defined), to purchase from NORAND
CORPORATION, a Delaware corporation (the "Company"), Twenty-one Thousand Seven
Hundred Seventy-seven (21,777) shares of the Common Stock of the Company
(subject to adjustment as provided herein), at a purchase price of $21.15 per
share (the initial "Exercise Price", subject to adjustment as provided herein),
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
<PAGE> 5
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with such Person, (b) which
beneficially owns or holds more than ten percent of the outstanding
shares of any class of voting stock of such Person and has the power
to vote such shares or (c) more than ten percent of the outstanding
shares of any class of voting stock (or, in the case of a Person which
is not a corporation, more than ten percent of the equity interest) of
which is beneficially owned or held by such Person and such Person has
the power to vote such shares or equity interest. The term "control"
as used with respect to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of voting securities, by contract or otherwise.
"After-Tax Basis", when referring to a payment that is
required hereunder (the "target amount"), shall mean a total payment
(the "total amount") that, after deduction of all federal, state and
local taxes that are required to be paid by the recipient in respect
of the receipt or accrual of such total amount, is equal to the target
amount.
"Agreed Rate" shall mean a rate per annum equal to the
corporate base rate of interest announced by The First National Bank
of Chicago from time to time, changing when and as said corporate base
rate changes.
"Appraised Value" per share of Common Stock as of a date
specified herein shall mean the value of such share as of such date as
determined by an investment bank of nationally recognized standing
selected by the Majority Warrant Holders from Schedule B (or any
successor of any such entity), it being understood that the Majority
Warrant Holders shall use commercially reasonable efforts to select
one of the first three listed entities subject to arriving at
reasonably acceptable terms and conditions for the
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<PAGE> 6
appraisal. The Company shall pay the costs and fees of such
investment bank, and the decision of the investment bank making such
determination of Appraised Value shall be final and binding on the
Company and all affected holders of Warrants or Warrant Stock. Such
Appraised Value shall be determined as a pro rata portion of the value
of the Company taken as a whole, based on the higher of (A) the value
derived from a hypothetical sale of the entire Company as a going
concern by a willing seller to a willing buyer (neither acting under
any compulsion) and (B) the liquidation value of the entire Company.
No discount shall be applied on account of (i) any Warrants or Warrant
Stock representing a minority interest, (ii) any lack of liquidity of
the Common Stock or the Warrants, (iii) the fact that the Warrants or
Warrant Stock may constitute "restricted securities" for securities
law purposes or (iv) the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company
Act of 1956, as amended.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed
in the State of Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13
hereof.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share,
as constituted on the Original Issue Date, and any capital stock into
which such Common Stock may thereafter be changed, and shall also
include (i) capital stock of the Company of any other class
(regardless of how denominated) issued to the holders of shares of any
Common Stock upon any reclassification thereof which is also not
preferred as to dividends or liquidation over any other
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<PAGE> 7
class of stock of the Company and which is not subject to redemption
and (ii) shares of common stock of any successor or acquiring
corporation (as defined in Section 4.5 hereof) received by or
distributed to the holders of Common Stock of the Company in the
circumstances contemplated by Section 4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation,
and any successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the
Company to comply in any material respect with any covenant of the
Company contained herein.
"Continuously Effective", with respect to a specified
registration statement, shall mean that it shall not cease to be
effective and available for Transfers of Warrant Stock thereunder for
the longer of either (i) any ten consecutive Business Days, or (ii) an
aggregate of fifteen Business Days during the period specified in the
relevant provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or
exchangeable for, with or without payment of additional consideration
in cash or property, shares of Common Stock, either immediately or
upon the occurrence of a specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated
Credit Agreement dated as of January 25, 1996, as thereafter from time
to time amended, supplemented, restated or modified, among the
Company, the Lenders party thereto and The First National Bank of
Chicago, as agent.
"Current Market Price" shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company
for the shorter of (x) the twenty consecutive Business Days
immediately preceding such date or (y) the period commencing on the
Business Day next following the first public announcement of any event
giving rise to an adjustment of the Exercise Price pursuant to Section
4 below
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<PAGE> 8
and ending on such date. The "daily market price" for each such
Business Day shall be: (i) if the Common Stock is then listed on a
national securities exchange or is listed on NASDAQ and is designated
as a National Market System security, the last sale price, regular
way, on such day on the principal stock exchange or market system on
which such Common Stock is then listed or admitted to trading, or, if
no such sale takes place on such day, the average of the closing bid
and asked prices for the Common Stock on such day as reported on such
stock exchange or market system or (ii) if the Common Stock is not
then listed or admitted to trading on any national securities exchange
or designated as a National Market System security on NASDAQ but is
traded over-the-counter, the average of the closing bid and asked
prices for the Common Stock as reported on NASDAQ or the Electronic
Bulletin Board or in the National Daily Quotation Sheets, as
applicable.
"Demand Registration" shall have the meaning set forth in
Section 9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in
Section 9.2(a) hereof.
"Designated Office" shall have the meaning set forth in
Section 11 hereof.
"Equity" shall mean equity capital (not including the equity
capital attributable to the Settlement Stock, and any mandatory
redemption terms of which equity capital are acceptable to the
Majority Warrant Holders) raised by and/or contributed to the Company
subsequent to the Original Issue Date or new Indebtedness (as defined
in the Credit Agreement) subordinated to the Obligations (as defined
in the Credit Agreement), provided the terms of such Indebtedness
(including, without limitation, maturity, amortization, covenants,
defaults, remedies and subordination provisions) are acceptable to the
Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
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<PAGE> 9
"Exercise Notice" shall have the meaning set forth in Section
2.1 hereof.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the initial Exercise Price set
forth in the preamble of this Warrant as adjusted from time to time
pursuant to Section 4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended
under the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified
date shall mean (A) if the Common Stock is publicly traded on such
date, the Current Market Price per share or (B) if the Common Stock is
not publicly traded on such date, (1) the fair market value per share
of Common Stock as determined in good faith by the Board of Directors
of the Company and set forth in a written notice to each Holder or (2)
if the Majority Warrant Holders object in writing to such price as
determined by the Board of Directors within thirty days after
receiving notice of same, the Appraised Value per share as of such
date.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of
shares thereof is to be determined, all shares of Common Stock
Outstanding on such date and all shares of Common Stock issuable in
respect of (x) the Warrants outstanding on such date, (y) any
Convertible Securities outstanding on such date and (z) any other
Stock Purchase Rights outstanding on such date, in each case
regardless of whether or not the conversion, exchange, subscription or
purchase rights associated with such Convertible Securities or Stock
Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
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"Glass-Steagall Act" shall mean Section 24 (Seventh),
Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C.
Section Section 24 (Seventh) 78, 377, 378), or any similar
federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the
Person in whose name the Warrant set forth herein is registered on the
books of the Company maintained for such purpose and (b) with respect
to any other Warrant or shares of Warrant Stock, the Person in whose
name such Warrant or Warrant Stock is registered on the books of the
Company maintained for such purpose.
"Insolvency Event" shall mean any proceeding being instituted
by or against the Company seeking a declaration or order for relief,
or entailing a finding, that the Company is insolvent or bankrupt, or
seeking reorganization, liquidation, dissolution, winding-up, charter
revocation or other similar relief with respect to the Company or any
of its properties, assets or debts, or seeking the appointment of a
receiver, trustee, custodian, liquidator, sequestrator or similar
official for the Company or any of its properties or assets, or the
Company becoming insolvent or bankrupt or generally unable to pay its
debts as they become due, or the Company voluntarily suspending its
business or making a general assignment for the benefit of creditors;
provided that an Insolvency Event shall not be deemed to have occurred
on account of any such proceeding which is involuntary on the part of
the Company unless same shall not have been dismissed or stayed within
60 days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement perfecting a security
interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
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"Majority Warrant Holders", with respect to a given
determination, shall mean the Holders of Warrants and/or Warrant Stock
representing at least seventy-six percent (76%) of all Warrants and/or
Warrant Stock (with any such Warrants being deemed to represent, for
the purposes of such calculation, the shares of Warrant Stock then
issuable upon exercise thereof) directly affected by such
determination.
"Majority Selling Holders" shall mean those Selling Holders
whose Warrants and/or Warrant Stock included in a registration under
Section 9 hereof represents a majority of the Warrants and/or Warrant
Stock (with any such Warrants being deemed to represent, for the
purposes of such calculation, the shares of Warrant Stock then
issuable upon exercise thereof) included therein by all Selling
Holders.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any
successor reporting system.
"Notes" shall mean any of the promissory notes issued by the
Company under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel
experienced in Securities Act or bank regulatory matters, as the case
may be, chosen by the Holder of this Warrant or Warrant Stock issued
upon the exercise hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the
Original Warrants were issued, as set forth on the cover page of this
Warrant.
"Original Warrants" shall mean the Warrants originally issued
by the Company on the Original Issue Date to each of The First
National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa
Bank, Limited, Norwest Bank Iowa, National Association and Caisse
Nationale de Credit Agricole.
"Other Property" shall have the meaning set forth in Section
4.5 hereof.
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"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then
owned or held by or for the account of the Company or any Subsidiary
thereof, and shall include all shares issuable in respect of
outstanding scrip or any certificates representing fractional
interests in shares of Common Stock. "Outstanding", when used with
respect to Warrant Stock for the purposes of Section 9 hereof shall
have the meaning set forth in Section 9.1(d) hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
incorporated organization, association, corporation, institution,
public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department
thereof).
"Piggyback Registration" shall have the meaning set forth in
Section 9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement
or similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
"Registration Expenses" shall have the meaning set forth in
Section 9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this
Warrant would be, evidenced by a certificate bearing the restrictive
legend set forth in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at
the time.
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"Selling Holders" shall mean, with respect to a specified
registration under Section 9 hereof, WS Holders whose Registrable
Securities are included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with,
and having the same terms (other than the number of shares purchasable
upon the exercise thereof) as, this Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with
this Warrant.
"Settlement Stock" shall mean the shares of Common Stock
contemplated to be issued in settlement of the pending shareholders'
claims against the Company with respect to the litigation styled In re
Norand Corporation Securities Litigation, Master File No. C95- 323,
pending in the United States District Court for the Northern District
of Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in
Section 2.1(c) hereof.
"Shelf Registration" shall have the meaning set forth in
Section 9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or
other securities or rights to subscribe to or exercisable for the
purchase of shares of Common Stock or Convertible Securities, whether
or not immediately exercisable, other than the options, warrants or
other rights described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the
Company of Common Stock, Convertible Securities or Stock Purchase
Rights after the Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of
the Warrants and any issuance of Common Stock, Convertible
Securities or Stock Purchase Rights (and
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<PAGE> 14
any issuance of Common Stock pursuant to the conversion,
exchange or exercise of any such Convertible Securities or
Stock Purchase Rights) deemed to have been issued as of the
Original Issue Date pursuant to the definition of Fully
Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the
exercise of the options and warrants described in Schedule A
hereto, provided, however, that the exercise price of any such
option or warrant (other than warrants granted to Jay Alix and
Associates and to Donald W. Rowley for up to the respective
number of shares set forth on Schedule A) granted or issued
after the Original Issue Date shall not be less than the
"daily market price" (as that term is defined in the
definition of Current Market Price) of the Common Stock on the
date of grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) The issuance of Common Stock or Convertible
Securities directly related to the Company's receipt of Equity
if, and only if, the aggregate Equity actually received by the
Company between the Original Issue Date and August 31, 1997
equals or exceeds $20 million (otherwise, after August 31,
1997, all such issuances, both prior to and after August 31,
1996, shall be considered a Subsequent Issuance for purposes
of Section 4 hereof).
(v) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights with respect to which the
Majority Warrant Holders shall have waived application of the
provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more
than 50% (by number of votes) of the voting stock of which is at the
time owned by the Company or by one or more Subsidiaries or by the
Company and one or more Subsidiaries, or any other business entity in
which the Company or one or more Subsidiaries or the Company and one
or more Subsidiaries own more than a 50% interest either in the
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<PAGE> 15
profits or capital of such business entity or (b) whose net earnings,
or portions thereof, are consolidated with the net earnings of the
Company and are recorded on the books of the Company for financial
reporting purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would
constitute a "sale" thereof within the meaning of the Securities Act.
"Triggering Event" shall mean the repayment in full of all
indebtedness under the Credit Agreement.
"Violation" has the meaning set forth in Section 9.7(a)
hereof.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this
Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the
Exercise Price as of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants
issued upon transfer, division or combination of, or in substitution
for, such Original Warrants or any other such Warrant. All Warrants
shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may
be exercised.
"Warrant Stock" generally shall mean the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants until such time as such shares of Common Stock
have either been (i) Transferred in a public offering pursuant to a
registration statement filed under the Securities Act or (ii)
Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section
4(1) thereof with all transfer restrictions and restrictive legends
with respect to such Common Stock being removed in connection with
such transaction. "Warrant Stock", for the purposes of Section 9
hereof, shall have the meaning set forth in Section 9.1(b) hereof.
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<PAGE> 16
"WS Holder" shall have the meaning set forth in Section 9.1(a)
hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after May 31, 1997
and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder
(as determined pursuant to Section 2.2 below). In order to exercise this
Warrant, in whole or in part, the Holder shall (i) deliver to the Company at
the Designated Office a written notice of the Holder's election to exercise
this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable
and specify the number of shares of Common Stock to be purchased, together with
this Warrant and (ii) pay to the Company the Warrant Price (the date on which
both such delivery and payment shall have first taken place being hereinafter
sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be
in the form of the subscription form appearing at the end of this Warrant as
Annex A, duly executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and
payment, the Company shall, as promptly as practicable, and in any event within
five Business Days thereafter, execute (or cause to be executed) and deliver
(or cause to be delivered) to the Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as the
exercising Holder shall reasonably request in the Exercise Notice and shall be
registered in the name of the Holder or such other name as shall be designated
in the Exercise Notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be
deemed to have become a holder of record of such shares for all purposes, as of
the Exercise Date.
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<PAGE> 17
(c) Payment of the Warrant Price shall be made at the option
of the Holder by one or more of the following methods: (i) by delivery of a
certified or official bank check in the amount of such Warrant Price, (ii) by
instructing the Company to withhold a number of shares of Warrant Stock then
issuable upon exercise of this Warrant with an aggregate Current Market Price
equal to such Warrant Price (the "Share Withholding Option"), (iii) by
surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate Current Market Price equal to such Warrant Price
or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate
instruments of transfer duly executed by the Holder or by the Holder's attorney
duly authorized in writing. In the event of any withholding of Warrant Stock
or surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Current Market Price is equal to the Warrant Price is
not a whole number, the number of shares withheld by or surrendered to the
Company shall be rounded up to the nearest whole share and the Company shall
make a cash payment to the Holder based on the incremental fraction of a share
being so withheld by or surrendered to the Company in an amount determined in
accordance with Section 2.3 hereof. For the purpose of making payment of the
Warrant Price, any Note surrendered to the Company shall be deemed to have a
value equal to 100% of the principal amount thereof plus any interest accrued
but unpaid thereon. If the Holder delivers a Note with a deemed value that
exceeds the Warrant Price, the Company shall reissue to the Holder a new Note
identical in all respects to the surrendered Note except that the principal
amount of such new Note shall be equal to the principal amount that, together
with any interest accrued but unpaid thereon, is equal to the deemed value of
the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing the shares of Common Stock being issued, deliver to the Holder a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
shares of Common Stock called for by this Warrant. Such new Warrant shall in
all other respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof shall
be validly issued, fully paid and nonassess-
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<PAGE> 18
able, issued without violation of any preemptive rights and free and clear of
all Liens (other than any created by actions of the Holder). The Company shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder and the Company shall reimburse
the Holder therefor on an After-Tax Basis.
2.3. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to
any fraction of a share that the Holder of one or more Warrants, the rights
under which are exercised in the same transaction, would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of the
Current Market Price of one share of Common Stock on the Exercise Date, if the
Common Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of
shares of Warrant Stock issued upon the exercise of this Warrant, in whole or
in part, including any transferee of such shares (other than a transferee in
whose hands such shares no longer constitute Warrant Stock as defined herein),
shall continue, with respect to such shares, to be entitled to all rights and
to be subject to all obligations that are applicable to such Holder by the
terms of this Warrant under Section 9 hereof. The Company shall, at the time
of any exercise of this Warrant or any transfer of Warrant Stock, upon the
request of the Holder of the shares of Warrant Stock issued in connection with
such exercise or transfer, acknowledge in writing, in a form reasonably
satisfactory to such Holder, its continuing obligation to afford to such Holder
such rights referred to in this Section 2.4; provided, however, that if such
Holder shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder all such rights.
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<PAGE> 19
2.5. Limitation on Regulated Holder's Exercise.
Notwithstanding anything in this Warrant to the contrary, the Holder of this
Warrant, if subject to the Bank Holding Company Act or any provision of the
Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is
accompanied by an Opinion of Counsel of such Holder to the effect that, as of
the date of delivery of such opinion, no federal or state regulatory clearances
are required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such clearances would be obtained or
make it likely that such clearances would, if obtained, contain material
conditions adverse to such Holder. In the event that federal or state
regulatory clearances are required prior to the exercise of this Warrant by the
Holder hereof, the Company shall reasonably cooperate with such Holder in
providing such information to any regulatory agency as such agency may
reasonably require. In the event any such regulatory clearance is withheld or
denied, such Holder may continue to hold this Warrant until its expiration or
may sell or otherwise transfer this Warrant in accordance with the terms
hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof,
each transfer of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the Designated Office, together with
a written assignment of this Warrant in the form of Annex B hereto duly
executed by the Holder or its agent or attorney. Upon such surrender and
delivery, the Company shall, subject to Section 8, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 8, may be exercised by the new Holder for
the purchase of shares of Common Stock without having a new Warrant issued.
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3.2. Division and Combination. Subject to compliance with
the applicable provisions of this Warrant, this Warrant may be divided or
combined with other Warrants upon presentation hereof at the Designated Office,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the applicable provisions of this Warrant as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver
at its own expense any new Warrant or Warrants required to be issued under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain,
at the Designated Office, books for the registration and transfer of the
Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is
exercisable and the Exercise Price shall be subject to adjustment from time to
time as set forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at
any time the Company shall:
(i) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or
other distribution of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the
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number of shares of Common Stock Outstanding immediately prior to the
adjustment and the denominator of which is equal to the number of shares of
Common Stock Outstanding immediately after such adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If
at any time the Company shall issue or sell any shares of Common Stock in a
Subsequent Issuance for a consideration per share that is less than the
Exercise Price in effect immediately prior to such issuance or sale, then,
forthwith upon such issuance or sale, the Exercise Price shall be reduced to a
price calculated by dividing (1) an amount equal to the sum of (x) the number
of shares of Common Stock Outstanding immediately prior to such Subsequent
Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate
consideration (determined in accordance with the provisions of Section 4.6
hereof), if any, received by the Company in connection with such Subsequent
Issuance, by (2) the total number of shares of Common Stock Outstanding
immediately after such Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i)
any issuance of Common Stock for which an adjustment is provided for under
Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the
exercise of any Stock Purchase Rights or Convertible Securities to the extent
that an adjustment shall have been previously made hereunder in connection with
the issuance of such Stock Purchase Rights or Convertible Securities pursuant
to the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible
Securities. (a) In the event that the Company shall at any time issue, sell
or grant any Stock Purchase Rights to any Person in a Subsequent Issuance,
then, for the purpose of Section 4.2 above, the Company shall be deemed to have
issued at that time a number of shares of Common Stock equal to the maximum
number of shares of Common Stock (without giving effect to any antidilution
provisions in such Stock Purchase Rights) that are or may become issuable upon
exercise of such Stock Purchase Rights (or upon exercise of any Convertible
Securities issuable upon exercise of such Stock Purchase Rights) for a
consideration per share equal to (i) the aggregate consideration per share
(determined in accordance with the provisions of Section 4.6 hereof) received
by the Company in connection with the issuance, sale or grant of such Stock
Purchase Rights plus (ii) the minimum
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amount of such consideration per share receivable by the Company in connection
with the exercise of such Stock Purchase Rights (and the exercise of any
Convertible Securities issuable upon exercise of such Stock Purchase Rights).
(b) In the event that the Company shall at any time issue or
sell any Convertible Securities to any Person in a Subsequent Issuance, then,
for the purposes of Section 4.2 above, the Company shall be deemed to have
issued at that time a number of shares of Common Stock equal to the maximum
number of shares of Common Stock that are or may become issuable upon the
exercise of the conversion or exchange rights associated with such Convertible
Securities for a consideration per share equal to (i) the aggregate
consideration per share (determined in accordance with the provisions of
Section 4.6 hereof) received by the Company in connection with the issuance or
sale of such Convertible Securities plus (ii) the minimum amount of such
consideration per share receivable by the Company in connection with the
exercise of such conversion or exchange rights.
(c) If, at any time after any adjustment of the Exercise
Price shall have been made hereunder as the result of any issuance, sale or
grant of any Stock Purchase Rights or Convertible Securities, the maximum
number of shares issuable upon exercise of such Stock Purchase Rights or of the
rights of conversion or exchange associated with such Convertible Securities
shall increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise
Price shall have been made hereunder as the result of any issuance, sale or
grant of any Stock Purchase Rights or
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<PAGE> 23
Convertible Securities, any of such Stock Purchase Rights or the rights of
conversion or exchange associated with such Convertible Securities shall expire
by their terms or any of such Stock Purchase Rights or Convertible Securities
shall be repurchased by the Company or a Subsidiary thereof for a consideration
per underlying share of Common Stock not exceeding the amount of such
consideration received by the Company in connection with the issuance, sale or
grant of such Stock Purchase Rights or Convertible Securities, the Exercise
Price then in effect shall forthwith be increased to the Exercise Price that
would have been in effect if such expiring Stock Purchase Rights or rights of
conversion or exchange or such repurchased Stock Purchase Rights or Convertible
Securities had never been issued. Similarly, if at any time after any such
adjustment of the Exercise Price shall have been made pursuant to Section 4.2
(i) any additional consideration is received or becomes receivable by the
Company in connection with the issuance or exercise of such Stock Purchase
Rights or Convertible Securities or (ii) there is a reduction in the conversion
ratio applicable to such Convertible Securities so that fewer shares of Common
Stock will be issuable upon the conversion or exchange thereof or there is a
decrease in the number of shares of Common Stock issuable upon exercise of such
Stock Purchase Rights, the Exercise Price then in effect shall be forthwith
readjusted to the Exercise Price that would have been in effect had such
changes taken place at the time that such Stock Purchase Rights or Convertible
Securities were initially issued, granted or sold. In no event shall any
readjustment under this Section 4.3(d) affect the validity of any shares of
Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof,
the Holder hereof shall thereafter be entitled to purchase upon the exercise of
this Warrant, at the Exercise Price resulting from such adjustment, the number
of shares of Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such
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adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Holder of this Warrant shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In such event, the
aggregate Exercise Price otherwise payable for the shares of Common Stock
issuable upon exercise of this Warrant shall be allocated among the shares of
common stock and Other Property receivable as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modi-
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fications as may be reasonably deemed appropriate (as determined by resolution
of the Board of Directors of the Company) in order to provide for adjustments
of any shares of the common stock of such successor or acquiring corporation
for which this Warrant thus becomes exercisable, which modifications shall be
as equivalent as practicable to the adjustments provided for in this Section 4.
For purposes of this Section 4.5, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class that is not
preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. Determination of Consideration. For purposes of
Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable
by the Company in connection with the issuance, sale, grant or exercise of
additional shares of Common Stock, Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such consideration,
shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any accrued interest or
dividends, expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company.
(2) Securities or Other Property. In the case of
securities or other property, the fair market value thereof as of the
date immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event
shares of Common Stock are issued or sold together with other
securities or other assets of the Company for a consideration which
covers both, the
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consideration received (computed as provided in (1) and (2) above)
shall be allocable to such shares of Common Stock as determined in
good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or
Convertible Securities shall be issued or sold together with other
securities or other assets of the Company, together comprising one
integral transaction in which no specific consideration is allocated
to the Stock Purchase Rights or Convertible Securities, the
consideration allocable to such Stock Purchase Rights or Convertible
Securities shall be determined in good faith by the Board of Directors
of the Company.
(5) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock of
the Company payable in either case in Common Stock or Convertible
Securities, such Common Stock or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value
on the date of issuance of such security of such portion of the assets
and business of the non-surviving corporation attributable to such
Common Stock, Stock Purchase Rights or Convertible Securities, as is
determined in good faith by the Company's Board of Directors.
(7) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under this
Section 4, such determination may be challenged in good faith by the
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Majority Warrant Holders, and any dispute shall be resolved by an
investment banking or appraisal firm of recognized national standing
selected by the Company and reasonably acceptable to the Majority
Warrant Holders and whose decision shall be binding on the Company and
all holders of Warrants. The fees and expenses of such firm shall be
paid by the party or parties whose position is not chosen by such
firm.
4.7. Other Dilutive Events. In case any event shall occur as
to which the other provisions of this Section 4 are not strictly applicable but
as to which the failure to make any adjustment would not fairly protect the
purchase rights represented by this Warrant in accordance with the essential
intent and principles hereof (including, without limitation, the issuance of
securities other than Common Stock which have the right to participate in
distributions to the holders of Common Stock, the granting of "phantom stock"
rights or "stock appreciation rights" or the repurchase of outstanding shares
of Common Stock, Convertible Securities or Stock Purchase Rights for a
purchase price exceeding the fair market value thereof), then, in each such
case, the Majority Warrant Holders may select an independent investment banking
firm of nationally recognized standing and reasonably acceptable to the Company
to make a determination as to the adjustment, if any, required to be made on a
basis consistent with the essential intent and principles established herein as
a result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
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4.8. Other Provisions Applicable to Adjustments Under this
Section. The following provisions shall be applicable to the adjustments
provided for pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring such an adjustment shall occur. For the purpose of
any such adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(b) Record Date. In case the Company shall take a record
of the holders of the Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Convertible Securities or Stock Purchase Rights or (ii) to
subscribe for or purchase Common Stock, Convertible Securities or
Stock Purchase Rights, then all references in this Section 4 to the
date of the issuance or sale of such shares of Common Stock,
Convertible Securities or Stock Purchase Rights shall be deemed to be
references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken
into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon its
plan to pay or deliver such dividend or distribution, then thereafter
no adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in
Section 4.1 above, at no time shall the Exercise Price per share of
Common Stock exceed the amount set forth in the first paragraph of the
preamble of this Warrant.
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(f) Certain Limitations. Notwithstanding anything herein
to the contrary, the Company agrees not to enter into any transaction
that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above,
would cause the Exercise Price to be less than the par value of the
Common Stock, if any, unless the Company first reduces the par value
of the Common Stock to be less than the Exercise Price that would
result from such transaction.
(g) Notice of Adjustments. Whenever the number of shares
of Common Stock for which this Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to this Section 4, the Company shall
forthwith prepare a certificate to be executed by the President or
chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of
Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.5) describing the number and
kind of any other shares of stock or Other Property for which this
Warrant is exercisable, and any related change in the Exercise Price,
after giving effect to such adjustment or change. The Company shall
promptly cause a signed copy of such certificate to be delivered to
each Holder in accordance with Section 15.2. The Company shall keep
at its principal office or at the Designated Office, if different,
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder
or any prospective transferee of a Warrant designated by a Holder
thereof.
(h) Independent Application. Except as otherwise
provided herein, all subsections of this Section 4 are intended to
operate independently of one another (but without duplication). If an
event occurs that requires the application of more than one
subsection, all applicable subsections shall be given independent
effect without duplication.
5. NO IMPAIRMENT
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The Company shall not by any action, including, without
limitation, amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other similar voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
reasonably appropriate to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company shall take all
such action as may be necessary or reasonably appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, free and clear of all Liens,
and shall use all commercially reasonably efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at
all times reserve and keep available for issuance upon the exercise of the
Warrants such number of its authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of all outstanding Warrants.
All shares of Common Stock issuable pursuant to the terms hereof, when issued
upon exercise of this Warrant with payment therefor in accordance with the
terms hereof, shall be duly and validly issued and fully paid and
nonassessable, not subject to preemptive rights and shall be free and clear of
all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any consolidation or merger involving
the Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or
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(b) any amendment of the Certificate of Incorporation of the Company, the
Company shall mail to each Holder of a Warrant in accordance with the
provisions of Section 14.2 hereof a notice specifying the date or expected date
on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for the securities
or Other Property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer or disposition, and a
description in reasonable detail of the transaction. Such notice shall be
mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any
time, except upon dissolution, liquidation or winding up of the Company, close
its stock transfer books or Warrant transfer books so as to result in
preventing or delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound
by the provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any
shares of Restricted Common Stock issued upon the exercise hereof shall be
Transferred other than pursuant to an effective registration statement under
the Securities Act or an exemption from the registration provisions thereof.
No Transfer of this Warrant or any such shares of Restricted Stock, other than
pursuant to such an effective registration statement, shall be valid or
effective unless (a) the holder of the securities proposed to be transferred
shall have delivered to the Company either a no-action letter from the
Commission or an Opinion of
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Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion
of Counsel to the effect that such legend is not required for the purposes of
compliance with the Securities Act. Holders of the Warrants or the Restricted
Common Stock, as the case may be, shall not be entitled to Transfer such
Warrants or such Restricted Common Stock except in accordance with this Section
8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided
in this Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS
MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE
DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN
SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE
EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144
OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO
THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
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"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A
COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE
COMPANY."
(b) Except as otherwise provided in this Section 8, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE
VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF
THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE
COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS
AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER
THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE
PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions.
Notwithstanding the foregoing provisions of this Section 8, the restrictions
imposed by Section 8.1(b) upon the transferability of the Warrants and the
Restricted Common Stock and the legend requirements of Section 8.2 shall
terminate as to any particular Warrant or shares of Restricted Common Stock
when the Company shall have received from the Holder thereof an Opinion of
Counsel to the effect that such legend is not required in order to ensure
compliance with the Securities Act. Whenever the restrictions imposed by
Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove
provided, the Holder hereof shall be entitled to receive from the Company, at
the expense of the
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Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the Holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series B Warrants and the
holders of Warrant Stock (as defined in Section 9.1(b)) are
collectively referred to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the
shares of Common Stock issued, issuable or both (as the context may
require) upon the exercise of Warrants and the Series B Warrants until
such time as such shares of Common Stock have either been (a)
Transferred in a public offering pursuant to a registration statement
filed under the Securities Act or (b) Transferred in a transaction
exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof with all transfer
restrictions and restrictive legends with respect to such Common Stock
being removed in connection with such transaction,(ii) any other
securities issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange by the Company
generally for, or in replacement by the Company generally
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of, any shares of Warrant Stock and (iii) any securities issued in
exchange for any such Warrant Stock in any merger or reorganization of
the Company, but in the cases of clauses (ii) and (iii) only so long
as such securities have not been registered and Transferred pursuant
to the Securities Act or Transferred in a transaction exempt from the
registration and prospectus delivery requirements of the Securities
Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect to such securities are removed in
connection with such Transfer.
(c) Each WS Holder shall be deemed to "hold", as of any
specified date, the aggregate of (i) the number of shares of Warrant
Stock held by such WS Holder as of such date plus (ii) the number of
shares of Warrant Stock issuable upon exercise of any Warrants and
Series B Warrants held by such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total
number of shares of Warrant Stock Outstanding as of such date plus
(ii) the number of shares of Warrant Stock issuable upon exercise of
all outstanding Warrants and Series B Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any
Series B Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company
receives at any time after August 31, 1997 a written request from one or more
WS Holders holding in the aggregate at least seventy-six percent of the number
of shares of Warrant Stock then outstanding (the "Demanding Holders") that the
Company file a registration statement under the Securities Act for the sale or
other disposition of at least a majority of the Registrable Securities (a
"Demand Registration"), the Company shall promptly give written notice of such
request to each other WS Holder and each such WS Holder may elect, by giving
written notice of such election to the Company within ten (10) Business Days
after receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for
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an offering on a delayed or continual basis pursuant to Rule 415 under the
Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand
Registration, the Company shall:
(1) File the requested registration statement with
the Commission as promptly as practicable, and shall use all
commercially reasonable efforts to have the registration declared
effective under the Securities Act as soon as reasonably practicable,
in each instance giving due regard to the need to prepare and file
current financial statements, conduct due diligence and complete other
actions that are reasonably necessary to effect a registered public
offering; and
(2) Use all commercially reasonable efforts to keep
the such registration statement Continuously Effective (x) if a Demand
Registration, for up to 90 days or until such earlier date as of which
all Registrable Securities covered by such registration statement
shall have been disposed of in the manner described in the
registration statement, and (y) if a Shelf Registration, for 270 days.
Notwithstanding the foregoing, if for any reason the effectiveness of
a Demand Registration is suspended or postponed as permitted by
Subsection (d) below, the foregoing period shall be extended by the
aggregate number of days of such suspension or postponement.
(c) The Company shall not be required to effect a
registration of Registrable Securities pursuant to a Demand Registration on
more than one occasion. For purposes of this Subsection (c), registration
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective, (ii) if after such registration
statement has become effective, such registration or the related offer, sale or
distribution of Registrable Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not
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satisfied or waived, other than by reason of a failure on the part of the
Selling Holders. If the Company shall have complied with its obligations under
this Section 9, a right to demand a registration pursuant to this Section 9.2
shall be deemed to have been satisfied (i) if a Demand Registration other than
a Shelf Registration, upon the earlier of (x) the date as of which all of the
Registrable Securities included therein shall have been disposed of pursuant to
the registration statement and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of 90 days,
and (ii) if a Shelf Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90
days the filing of any Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2 or suspend any such Demand
Registration for up to 90 days, if the Board of Directors of the Company
determines, in its good faith reasonable judgment that such registration and
the Transfer of Warrant Stock contemplated thereby would materially interfere
with, or require premature disclosure of, any financing, acquisition or
reorganization involving the Company or any of its wholly owned subsidiaries
and the Company promptly gives the Demanding Holders notice of such
determination; provided, however, that the Company shall not have postponed
pursuant to this Subsection (d) the filing of any other Demand Registration
statement otherwise required to be prepared and filed pursuant to this Section
9.2, or suspended any such Demand Registration, during the 12 month period
ended on the date of the relevant request pursuant to Subsection (a) above and
provided further, that the Expiration Date shall be extended by the period of
any such postponement or suspension.
(e) A registration pursuant to this Section 9.2 shall be on
such appropriate registration form of the Commission available to the Company
as shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or
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"all reasonable efforts" basis or otherwise), or an agented offering, the
Majority Selling Holders shall have the right to select the underwriter or
underwriters and manager or managers to administer such underwritten offering
or the placement agent or agents for such agented offering from among the
entities listed in Schedule B hereto (or any successors of any such entities),
it being understood that the Majority Selling Holders shall use commercially
reasonable efforts to select one or more of the first three listed entities
subject to arriving at reasonably acceptable terms and conditions for the
offering.
(f) The Company may elect to include shares of Common
Stock to be sold for its account in any such Demand Registration (including a
Shelf Registration); provided, however, if the managing underwriter shall
advise the Demanding Holders in writing (with a copy to the Company) that, in
its opinion, the number of shares of Common Stock requested to be included in
such Demand Registration would adversely affect such offering or the price to
be realized therefor, or the timing thereof, then the number of shares proposed
to be included in such Demand Registration by the Company shall be reduced, to
such number that the Demanding Holders are advised can be sold without such
effect in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders of the Company other than the WS Holders) equity
securities under the Securities Act in connection with the public offering
solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor
forms), the Company shall promptly give each WS Holder written notice of such
registration (a "Piggyback Registration"). Upon the written request of each WS
Holder given within 20 days following the date of such notice, the Company
shall cause to be included in such registration statement and use its best
efforts to be registered under the Securities Act all the Registrable
Securities that each such WS Holder shall have requested to be registered. The
Company shall have the absolute right to withdraw or cease to prepare or file
any registration statement for any offering referred to in this Section 9.3
without any obligation or liability to any WS Holder.
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(b) If the managing underwriter shall advise the Company in
writing (with a copy to each Selling Holder) that, in its opinion, the amount
of Registrable Securities requested to be included in such registration would
materially adversely affect such offering, or the timing thereof, then the
Company will include in such registration, to the extent of the amount and
class which the Company is so advised can be sold without such material adverse
effect in such offering: first, all securities proposed to be sold by the
Company for its own account; and second, the Warrant Stock requested to be
included in such registration by WS Holders and all other securities requested
to be included in such registration by Persons other than the Company and WS
Holders, the securities covered by this clause second to be included pro rata
based on the estimated gross proceeds from the sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable
Securities included in an unlimited number of Piggyback Registrations pursuant
to this Section 9.3.
9.4. Registration Procedures. Whenever required under
Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration
statement with respect to such Warrant Stock and use the Company's
best efforts to cause such registration statement to become effective;
provided, however, that before filing a registration statement or
prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of the
registration statement and prior to effectiveness thereof, the Company
shall furnish to one firm of counsel for the Selling Holders (selected
by Majority Selling Holders) copies of all such documents in the form
substantially as proposed to be filed with the Commission at least
four Business Days prior to filing for review and comment by such
counsel, which opportunity to comment shall include an absolute right
to control or contest disclosure if the applicable Selling Holder
reasonably believes that it may be subject to controlling person
liability under applicable securities laws with respect thereto.
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(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act and rules thereunder
with respect to the disposition of all securities covered by such
registration statement. If the registration is for an underwritten
offering, the Company shall amend the registration statement or
supplement the prospectus whenever required by the terms of the
underwriting agreement entered into pursuant to Section 9.4(e).
Subject to Rule 415 under the Securities Act, if the registration
statement is a Shelf Registration, the Company shall amend the
registration statement or supplement the prospectus so that it will
remain current and in compliance with the requirements of the
Securities Act for 270 days or after its effective date, and if during
such period any event or development occurs as a result of which the
registration statement or prospectus contains a misstatement 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,
the Company shall promptly notify each Selling Holder, amend the
registration statement or supplement the prospectus so that each will
thereafter comply with the Securities Act and furnish to each Selling
Holder of Registrable Securities such amended or supplemented
prospectus, which each such Holder shall thereafter use in the
Transfer of Warrant Stock covered by such registration statement.
Pending such amendment or supplement each such Selling Holder shall
cease making offers or Transfers of Registerable Securities pursuant
to the prior prospectus. In the event that any Registrable Securities
included in a registration statement subject to, or required by, this
Warrant remain unsold at the end of the period during which the
Company is obligated to use its best efforts to maintain the
effectiveness of such registration statement, the Company may file a
post-effective amendment to the registration statement for the purpose
of removing such Registrable Securities from registered status.
(c) Furnish to each Selling Holder of Registrable
Securities, without charge, such number of copies of the registration
statement, any pre-effective or post-effective amendment thereto, the
prospectus, including each
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preliminary prospectus and any amendments or supplements thereto, in
each case in conformity with the requirements of the Securities Act
and the rules thereunder, and such other related documents as any such
Selling Holder may reasonably request in order to facilitate the
disposition of Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to
register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such states
or jurisdictions as shall be reasonably requested by the managing
underwriter (as applicable, or if inapplicable, the Majority Selling
Holders), and (ii) to obtain the withdrawal of any order suspending
the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of
the offer and transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment; provided, however, that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten or agented offering,
enter into and perform the Company's obligations under an underwriting
or agency agreement (including indemnification and contribution
obligations of underwriters or agents), in usual and customary form,
with the managing underwriter or underwriters of or agents for such
offering. The Company shall also cooperate with the Majority Selling
Holders and the managing underwriter for such offering in the
marketing of the Warrant Stock, including making available the
Company's officers, accountants, counsel, premises, books and records
for such purpose, but the Company shall not be required to incur any
material out-of-pocket expense pursuant to this sentence.
(f) Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission in connection
therewith (and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
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(g) Make generally available to the Company's security
holders copies of all periodic reports, proxy statements, and other
information referred to in Section 9.9(a) and an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act no
later than 90 days following the end of the 12-month period beginning
with the first month of the Company's first fiscal quarter commencing
after the effective date of each registration statement filed pursuant
to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of
such Selling Holder and underwriter (but not more than one firm of
counsel to such Selling Holders), all financial and other information
as shall be reasonably requested by them, and provide the Selling
Holder, any underwriter participating in such offering and the
representatives of such Selling Holder and underwriter the opportunity
to discuss the business affairs of the Company with its principal
executives and independent public accountants who have certified the
audited financial statements included in such registration statement,
in each case all as necessary to enable them to exercise their due
diligence responsibility under the Securities Act; provided, however,
that information that the Company determines, in good faith, to be
confidential and which the Company advises such Person in writing, is
confidential shall not be disclosed unless such Person signs a
confidentiality agreement reasonably satisfactory to the Company or
the related Selling Holder of Registrable Securities agrees to be
responsible for such Person's breach of confidentiality on terms
reasonably satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called
"comfort letter" from its independent public accountants, and legal
opinions of counsel to the Company, in customary form and covering
such matters of the type customarily covered by such letters, and in a
form that shall be reasonably satisfactory to the Majority Selling
Holders. The Company shall furnish to each Selling Holder a signed
counterpart of any such comfort letter or legal opinion. Delivery of
any such opinion or comfort letter shall be subject to the recipient
furnishing such written representations or acknowledgments as are
customarily
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provided by selling shareholders who receive such comfort letters or
opinions.
(j) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement.
(k) Use all reasonable efforts to cause the Registrable
Securities covered by such registration statement (i) if the Common
Stock is then listed on a securities exchange or included for
quotation in a recognized trading market, to continue to be so listed
or included for a reasonable period of time after the offering, and
(ii) to be registered with or approved by such other United States or
state governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the
Selling Holders of Registrable Securities to consummate the
disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP
number for the Common Stock prior to the effective date of the first
registration statement including Registrable Securities.
(m) Take such other actions as are reasonably required in
order to expedite or facilitate the disposition of Registrable
Securities included in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Section 9 with respect to the Registrable Securities of any
Selling Holder that such Selling Holder shall:
(i) Furnish to the Company such information regarding such
Selling Holder, the number of Registrable Securities owned by it, and
the intended method of disposition of such securities as shall be
required to effect the registration of such Selling Holder's
Registrable Securities, and to cooperate with the Company in preparing
such registration; and
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(ii) Agree to sell their Registrable Securities to the
underwriters at the same price and on substantially the same terms and
conditions as the Company or the other Persons on whose behalf the
registration statement was being filed have agreed to sell their
securities, and to execute the underwriting agreement agreed to by the
Majority Selling Holders (in the case of a registration under Section
9.2) or the Company and the Majority Selling Holders (in the case of a
registration under Section 9.3).
(b) Each Selling Holder shall notify the Company of any
sales of such Selling Holder's shares registered for sale pursuant to
this Section 9; provided, however, it is understood that any failure
so to notify the Company shall not be deemed a default hereunder or to
subject any Selling Holder to any claim for damages or expenses
whatsoever.
9.6. Expenses of Registration. Expenses incurred in
connection with registrations under this Section 9 shall be allocated and paid
as follows:
(a) With respect to each Demand Registration (including any
Shelf Registration), the Company shall bear and pay all reasonable
expenses incurred in connection with any registration, filing, or
qualification of Registrable Securities with respect to such Demand
Registration for each Selling Holder, including all registration,
filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the reasonable
fees and disbursements of counsel for the Company, and of the
Company's independent public accountants, including the expenses of
"cold comfort" letters required by or incident to such performance and
compliance, and the reasonable fees and disbursements of one firm of
counsel for the Selling Holders of Registrable Securities (the
"Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on
a pro rata basis by the Selling Holders) provided, however, that the
Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 9.2 if the
registration is subsequently withdrawn at the request of the Majority
Selling Holders (in which case all Selling Holders shall bear such
expense),
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unless WS Holders whose Registrable Securities constitutes a majority
of the Registrable Securities then outstanding agree that such
withdrawn registration shall constitute the exercise of their one
demand registration under Section 9.2 hereof. The counsel for the
Selling Holders shall be selected by Demanding Holders owning a
majority of the Registrable Securities owned by Demanding Holders to
be included in a Demand Registration and, in the case of a Piggyback
Registration, by Selling Holders owning a majority of the Registrable
Securities to be included in such registration; provided that in the
case of a Piggyback Registration, the Selling Holders shall use one
firm of counsel to represent all such holders and shall endeavor in
good faith, with any other holders of securities to be included in
such registration, to select one firm of counsel to represent all such
selling securities holders.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to
Section 9.3 for each Selling Holder, but excluding underwriting
discounts and commissions relating to Registrable Securities (which
shall be paid on a pro rata basis by the Selling Holders of
Registrable Securities).
(c) Any failure of the Company to pay any Registration
Expenses as required by this Section 9.6 shall not relieve the Company
of its obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable
Securities are included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company
shall indemnify and hold harmless each Selling Holder, each Person, if
any, who controls such Selling Holder within the meaning of the
Securities Act, and each officer, director, partner, and employee of
such Selling Holder and such controlling Person, against any and all
losses, claims, damages, liabilities and expenses (joint or several),
including attorneys' fees and disbursements and expenses of
investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any
of the foregoing Persons may
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become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations pursuant to a final
non-appealable order (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein, or any amendments or supplements thereto;
(ii) 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; or
(iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any
applicable state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any
applicable state securities law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or expense to the
extent that it is determined by a court of competent jurisdiction by a
final non-appealable order to have solely arisen out of or be based
upon a Violation which occurred in reliance upon and in conformity
with written information furnished to the Company by the indemnified
party expressly for use in connection with such registration;
provided, further, that the indemnity agreement contained in this
Section 9.7(a) shall not apply to any underwriter to the extent that
any such loss is based on or arises out of an untrue statement or
alleged untrue statement of a material fact, or an omission or alleged
omission to state a material fact, contained in or omitted from any
preliminary prospectus if the final prospectus shall correct such
untrue statement or
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alleged untrue statement, or such omission or alleged omission, and a
copy of the final prospectus has not been sent or given to such person
at or prior to the confirmation of sale to such person if such
underwriter was under an obligation to deliver such final prospectus
and failed to do so. The Company shall also indemnify underwriters,
selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers,
directors, agents and employees and each person who controls such
persons (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Selling Holders.
(b) To the extent permitted by applicable law, each Selling
Holder shall indemnify and hold harmless the Company, each of its
directors, each of its officers and employees, each Person, if any,
who controls the Company within the meaning of the Securities Act, any
other Selling Holder, any controlling Person of any such other Selling
Holder and each officer, director, partner, and employee of such other
Selling Holder and such controlling Person, against any and all
losses, claims, damages, liabilities and expenses (joint and several),
including attorneys' fees and disbursements and expenses of
investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any
of the foregoing Persons may otherwise become subject under the
Securities Act, the Exchange Act or other federal or state laws,
insofar as such losses, claims, damages, liabilities and expenses are
determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation that occurred in reliance upon and in conformity with
written information furnished by such Selling Holder expressly for use
in connection with such registration; provided, however, that (x) the
indemnification required by this Section 9.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or expense if settlement is effected without the consent of the
relevant Selling Holder of Registrable Securities, which consent shall
not be unreasonably withheld, and (y) in no event shall the amount of
any indemnity under this Section 9.7(b) exceed the net
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proceeds from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under
this Section 9.7 of notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing for which
such indemnified party may make a claim under this Section 9.7, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees
and disbursements and expenses to be paid by the indemnifying party,
if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time following the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under
this Section 9.7 but shall not relieve the indemnifying party of any
liability that it may have to any indemnified party otherwise than
pursuant to this Section 9.7. Any reasonable fees and expenses
incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such
action or proceeding) shall be paid to the indemnified party, as
incurred, within thirty (30) days of written notice thereof to the
indemnifying party (regardless of whether it is ultimately determined
that an indemnified party is not entitled to indemnification
hereunder). Any such indemnified party shall have the right to employ
separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii)
the indemnifying party shall have failed to promptly assume the
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defense of such action, claim or proceeding or (iii) the named parties
to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel
that there may be one or more legal defenses available to it which are
different from or in addition to those available to the indemnifying
party and that the assertion of such defenses would create a conflict
of interest such that counsel employed by the indemnifying party could
not faithfully represent the indemnified party (in which case, if such
indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such action, claim or proceeding on behalf of such
indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or
proceeding or separate but substantially similar or related actions,
claims or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all such
indemnified parties, unless in the reasonable judgment of such
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with
respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from
the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute
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to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified
parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall
be determined by reference to, among other things, whether any
Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties,
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
Violation. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the
limitations set forth in Section 9.7(a) and Section 9.7(b),
any reasonable legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
(ii) The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section
9.7(d) were determined by pro rata allocation or by any other
method of allocation which does not take into account the
equitable considerations referred to in Section 9.7(d)(i)
above. 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.
(e) If indemnification is available under this Section 9.7,
the indemnifying parties shall indemnify each indemnified party to the
full extent provided in this Section 9.7 without regard to the
relative fault of such indemnifying party or indemnified party or any
other equitable consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be
made by periodic payments of the amount thereof during the course of
the investigation or defense, as and
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when bills are received or expense, loss, damage or liability is
incurred. In the event that it shall be subsequently determined that
the recipient of any such periodic payment shall not be entitled to
indemnification hereunder, such recipient promptly shall repay such
payments, together with interest thereon at the Agreed Rate from the
date of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the
completion of any offering of Registrable Securities pursuant to a
registration statement under this Section 9, and otherwise.
9.8. Holdback. Each WS Holder entitled pursuant to this
Section 9 to have Registrable Securities included in a registration statement
prepared pursuant to this Section 9, if so requested by the managing
underwriter in connection with an offering of any Registrable Securities, shall
not effect any public sale or distribution of shares of Common Stock,
Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to
Rule 144 or Rule 144A under the Securities Act and any sale as part of such
underwritten or agented registration), during the 5-day period prior to, and
during the 45-day period beginning on, the date such registration statement is
declared effective under the Securities Act by the Commission, provided that
such WS Holder is timely notified of such effective date in writing by the
Company or such managing underwriter.
9.9. Additional Covenants of the Company. The Company hereby
agrees and covenants as follows:
(a) The Company shall file as and when applicable, on a
timely basis, all reports required to be filed by it under the
Exchange Act. If the Company is not required to file reports pursuant
to the Exchange Act, upon the request of any WS Holder, the Company
shall make publicly available the information specified in
subparagraph (c)(2) of Rule 144 of the Securities Act, and take such
further action as may be reasonably required from time to time and as
may be within the reasonable control of the Company, to enable the WS
Holders to Transfer Warrants or Registrable Securities without
registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the
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Securities Act or any similar rule or regulation hereafter adopted by
the Commission. In addition, promptly upon the request of any WS
Holder, the Company shall provide such WS Holder with such publicly
available financial statements, reports and other information as may
be required to permit such WS Holder to Transfer shares of Registrable
Securities to Qualified Institutional Investors pursuant to Rule 144A
of the Securities Act.
(b) The Company shall not, and shall not permit its majority
owned subsidiaries to, effect any public sale or distribution of any
shares of Common Stock, Convertible Securities or Stock Purchase
Rights during the 5 Business Days prior to, and during the 90-day
period beginning on, the commencement of a public distribution of
Registrable Securities pursuant to any registration statement prepared
pursuant to this Section 9 (other than by the Company pursuant to such
registration if the registration is pursuant to Section 9.3 or by the
Company pursuant to any dividend reinvestment plan offered by it to
its stockholders). The Company shall not effect any registration of
its securities (other than on Form S-4, Form S-8, or any successor
forms to such forms or pursuant to such other registration rights
agreements as may be approved in writing by the Majority Selling
Holders) or effect any public or private sale or distribution of any
of its securities, including a sale pursuant to Regulation D under the
Securities Act, whether on its own behalf or at the request of any
holder or holders of such securities from the date of a request for a
Demand Registration pursuant to Section 9.2 until 90 days following
the effective date of such Demand Registration statement, unless the
Company shall have previously notified in writing all Selling Holders
of the Company's desire to do so, and the Majority Selling Holders or
the managing underwriter, if any, shall have consented thereto in
writing.
(c) Any agreement entered into on or after August 31, 1997
pursuant to which the Company or any of its majority owned
subsidiaries issues or agrees to issue any Common Stock (including,
without limitation, any employee stock option, stock purchase
agreement, merger agreement or other agreement) shall contain a
provision whereby any holder receiving such Common Stock who will hold
more than one
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percent (1%) of the amount of such Common Stock then outstanding shall
agree not to effect any public sale or distribution of any such Common
Stock during the periods described in the second sentence of Section
9.9(b), in each case including a sale pursuant to Rule 144 under the
Securities Act (unless such Person is prevented by applicable statute
or regulation from entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization
in which the Company shall not be the surviving corporation or (y)
Transfer or agree to Transfer all or substantially all the Company's
assets, unless prior to such merger, consolidation, reorganization or
asset Transfer, the surviving corporation or the Transferee,
respectively, shall have agreed in writing to assume the obligations
of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to include the
securities which the WS Holders would be entitled to receive in
exchange for Registrable Securities pursuant to any such merger,
consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and an indemnity reasonably
satisfactory to it (it being understood that the written indemnification
agreement of or affidavit of loss of Norwest Bank Iowa, National Association
shall be a sufficient indemnity) and, in case of mutilation, upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a new
Warrant of like tenor to such Holder; provided, however, in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable form
is surrendered to the Company for cancellation.
11. OFFICE OF THE COMPANY
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As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency, which may be the principal executive
offices of the Company (the "Designated Office"), where the Warrants may be
presented for exercise, registration of transfer, division or combination as
provided in this Warrant. Such Designated Office shall initially be the office
of the Company at Cedar Rapids, Iowa. The Company may from time to time change
the Designated Office to another office of the Company or its agent within the
United States by notice given to all registered holders of Warrants at least
ten Business Days prior to the effective date of such change.
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each
Holder of Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular
and periodic reports, proxy statements (other than preliminary) and
registration statements (other than registration statements on Forms
S-3 (relating to debt securities) and S-8) which the Company may file
with the Securities and Exchange Commission or any governmental agency
substituted therefor.
(ii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available by the Company to the holders of any class of its
securities generally or by any Subsidiary of the Company to the
holders of any class of its securities generally; and
(iii) with reasonable promptness, such other public
information relating to the Company and its Subsidiaries as the Holder
may, from time to time, reasonably request.
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13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written
notice (the "Call Notice") to the Holders of all outstanding Warrants given at
any time on or after the date of the occurrence of the Triggering Event and
before May 31, 1997, to repurchase on the date specified in the notice from
each Holder of a Warrant all of such Warrant for an amount equal to the result
(rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a
fraction, the numerator of which shall be the aggregate number of shares for
which this Warrant may be exercised and the denominator of which shall be the
aggregate number of shares for which all outstanding Series A Warrants may be
exercised, and in all events not more than One Dollar ($1.00) for all Series A
Warrants. On the date of any repurchase of this Warrant pursuant to this
Section 13, the Holder shall assign to the Company such Warrant without any
representation or warranty (except as to title and the absence of Liens), by
the surrender of this Warrant at the Designated Office against payment of the
repurchase price therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Company or the
Holder shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of such Person.
14.2. Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock
issued upon the exercise hereof, at its last known address appearing
on the books of the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
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or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when
due, any payments provided for in this Warrant, the Company shall pay to the
Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to
such Holder from the date due until the date of payment and (b) such further
amounts as shall be sufficient to cover any costs and expenses including, but
not limited to, reasonable attorneys' fees and expenses incurred by such Holder
in collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss, cost,
damage, reasonable attorneys' and accountants' fees and expenses, court costs
and all other out-of-pocket expenses incurred in connection with or arising
from a Company Default. This indemnification provision shall be in addition to
the rights of such Holder or Holders to bring an action against the Company for
breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder to pay the Exercise Price for
any Warrant Stock other than pursuant to an exercise of this Warrant or any
liability as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or Warrant
Stock, in addition to being entitled to exercise its rights granted by law,
including recovery of damages, shall be entitled to specific performance of its
rights provided under this War-
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<PAGE> 57
rant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provisions of
Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and
the permitted successors and assigns of the Holder hereof. The provisions of
this Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant and, in the case of Section 9, all Holders of shares of
Warrant Stock issued upon the exercise hereof (including transferees), and
shall be enforceable by any such Holder.
14.7. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Majority Warrant Holders, provided that no such Warrant may
be modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may
be purchased upon exercise of such Warrant (before giving effect to any
adjustment as provided therein) without the written consent of the Holder
thereof.
14.8. Severability. Wherever possible, each provision of
this Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO
CONTRACTS MADE AND
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<PAGE> 58
PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT,
THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF
THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED
BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH
BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT
IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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<PAGE> 59
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is __________________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 61
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the number
of shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint ________________________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.6
- --------------------------------------------------------------------------------
SERIES B WARRANT
to Purchase Common Stock of
NORAND CORPORATION
- --------------------------------------------------------------------------------
Warrant No. B - 1
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 13
3.1. Transfer 13
3.2. Division and Combination. 14
3.3. Expenses. 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and Convertible Securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under this Section 20
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions. 23
7.2. Closing of Transfer Books. 23
8. TRANSFER RESTRICTIONS 23
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures. 30
9.5. Selling Holders' Obligations. 34
9.6. Expenses of Registration. 34
9.7. Indemnification; Contribution. 35
9.8. Holdback. 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver. 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability. 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment. 45
14.8. Severability 45
14.9. Headings. 45
14.10. GOVERNING LAW; JURISDICTION. 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
SCHEDULE B UNDERWRITERS AND AGENTS
-ii-
<PAGE> 4
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY
OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE
TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION
OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT
OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER
THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE
PROPOSED TRANSFER.
Warrant No. B - 1
SERIES B WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT THE FIRST NATIONAL BANK OF CHICAGO, or registered
assigns, is entitled, at any time after August 31, 1997 and prior to the
Expiration Date (such term, and certain other capitalized terms used herein
being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware
corporation (the "Company"), One Hundred Six Thousand Six Hundred Twenty-nine
(106,629) shares of the Common Stock of the Company (subject to adjustment as
provided herein), at a purchase price of $21.15 per share (the initial
"Exercise Price", subject to adjustment as provided herein), all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
<PAGE> 5
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any class
of voting stock of such Person and has the power to vote such shares or (c)
more than ten percent of the outstanding shares of any class of voting
stock (or, in the case of a Person which is not a corporation, more than
ten percent of the equity interest) of which is beneficially owned or held
by such Person and such Person has the power to vote such shares or equity
interest. The term "control" as used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate base
rate of interest announced by The First National Bank of Chicago from time
to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined by
an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and conditions
for the
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<PAGE> 6
appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination of
Appraised Value shall be final and binding on the Company and all affected
holders of Warrants or Warrant Stock. Such Appraised Value shall be
determined as a pro rata portion of the value of the Company taken as a
whole, based on the higher of (A) the value derived from a hypothetical
sale of the entire Company as a going concern by a willing seller to a
willing buyer (neither acting under any compulsion) and (B) the liquidation
value of the entire Company. No discount shall be applied on account of
(i) any Warrants or Warrant Stock representing a minority interest, (ii)
any lack of liquidity of the Common Stock or the Warrants, (iii) the fact
that the Warrants or Warrant Stock may constitute "restricted securities"
for securities law purposes or (iv) the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of
Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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<PAGE> 7
class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.5 hereof) received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section
4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the Company
to comply in any material respect with any covenant of the Company
contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and available
for Transfers of Warrant Stock thereunder for the longer of either (i) any
ten consecutive Business Days, or (ii) an aggregate of fifteen Business
Days during the period specified in the relevant provision of Section 9
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable for,
with or without payment of additional consideration in cash or property,
shares of Common Stock, either immediately or upon the occurrence of a
specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the Lenders
party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the average
of the daily market prices of the Common Stock of the Company for the
shorter of (x) the twenty consecutive Business Days immediately preceding
such date or (y) the period commencing on the Business Day next following
the first public announcement of any event giving rise to an adjustment of
the Exercise Price pursuant to Section 4 below
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<PAGE> 8
and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a National
Market System security, the last sale price, regular way, on such day on
the principal stock exchange or market system on which such Common Stock is
then listed or admitted to trading, or, if no such sale takes place on such
day, the average of the closing bid and asked prices for the Common Stock
on such day as reported on such stock exchange or market system or (ii) if
the Common Stock is not then listed or admitted to trading on any national
securities exchange or designated as a National Market System security on
NASDAQ but is traded over-the-counter, the average of the closing bid and
asked prices for the Common Stock as reported on NASDAQ or the Electronic
Bulletin Board or in the National Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section 9.2(a)
hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms of
which equity capital are acceptable to the Majority Warrant Holders) raised
by and/or contributed to the Company subsequent to the Original Issue Date
or new Indebtedness (as defined in the Credit Agreement) subordinated to
the Obligations (as defined in the Credit Agreement), provided the terms of
such Indebtedness (including, without limitation, maturity, amortization,
covenants, defaults, remedies and subordination provisions) are acceptable
to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
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<PAGE> 9
"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at
any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to Section
4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under
the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date shall
mean (A) if the Common Stock is publicly traded on such date, the Current
Market Price per share or (B) if the Common Stock is not publicly traded on
such date, (1) the fair market value per share of Common Stock as
determined in good faith by the Board of Directors of the Company and set
forth in a written notice to each Holder or (2) if the Majority Warrant
Holders object in writing to such price as determined by the Board of
Directors within thirty days after receiving notice of same, the Appraised
Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding on such date and all
shares of Common Stock issuable in respect of (x) the Warrants outstanding
on such date, (y) any Convertible Securities outstanding on such date and
(z) any other Stock Purchase Rights outstanding on such date, in each case
regardless of whether or not the conversion, exchange, subscription or
purchase rights associated with such Convertible Securities or Stock
Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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<PAGE> 10
"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or entailing
a finding, that the Company is insolvent or bankrupt, or seeking
reorganization, liquidation, dissolution, winding-up, charter revocation or
other similar relief with respect to the Company or any of its properties,
assets or debts, or seeking the appointment of a receiver, trustee,
custodian, liquidator, sequestrator or similar official for the Company or
any of its properties or assets, or the Company becoming insolvent or
bankrupt or generally unable to pay its debts as they become due, or the
Company voluntarily suspending its business or making a general assignment
for the benefit of creditors; provided that an Insolvency Event shall not
be deemed to have occurred on account of any such proceeding which is
involuntary on the part of the Company unless same shall not have been
dismissed or stayed within 60 days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any lease or title retention
agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give,
any financing statement perfecting a security interest under the Uniform
Commercial Code or comparable law of any jurisdiction).
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<PAGE> 11
"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with any
such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced in
Securities Act or bank regulatory matters, as the case may be, chosen by
the Holder of this Warrant or Warrant Stock issued upon the exercise hereof
and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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<PAGE> 12
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any Subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock. "Outstanding",
when used with respect to Warrant Stock for the purposes of Section 9
hereof shall have the meaning set forth in Section 9.1(d) hereof.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, entity
or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration
or ordering by the Commission of effectiveness of such registration
statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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<PAGE> 13
"Selling Holders" shall mean, with respect to a specified registration
under Section 9 hereof, WS Holders whose Registrable Securities are
included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with this
Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with, and
having the same terms (other than the number of shares purchasable upon the
exercise thereof) as, this Warrant.
"Settlement Stock" shall mean the shares of Common Stock contemplated
to be issued in settlement of the pending shareholders' claims against the
Company with respect to the litigation styled In re Norand Corporation
Securities Litigation, Master File No. C95-323, pending in the United
States District Court for the Northern District of Iowa, Cedar Rapids
Division.
"Share Withholding Option" has the meaning set forth in Section 2.1(c)
hereof.
"Shelf Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after the
Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the Warrants
and any issuance of Common Stock, Convertible Securities or Stock
Purchase Rights (and
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<PAGE> 14
any issuance of Common Stock pursuant to the conversion, exchange or
exercise of any such Convertible Securities or Stock Purchase Rights)
deemed to have been issued as of the Original Issue Date pursuant to
the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of the
options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant (other
than warrants granted to Jay Alix and Associates and to Donald W.
Rowley for up to the respective number of shares set forth on Schedule
A) granted or issued after the Original Issue Date shall not be less
than the "daily market price" (as that term is defined in the
definition of Current Market Price) of the Common Stock on the date of
grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) Any other issuance of Common Stock, Convertible Securities
or Stock Purchase Rights with respect to which the Majority Warrant
Holders shall have waived application of the provisions of Section 4
below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or
more Subsidiaries, or any other business entity in which the Company or one
or more Subsidiaries or the Company and one or more Subsidiaries own more
than a 50% interest either in the profits or capital of such business
entity or (b) whose net earnings, or portions thereof, are consolidated
with the net earnings of the Company and are recorded on the books of the
Company for financial reporting purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a "sale"
thereof within the meaning of the Securities Act.
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<PAGE> 15
"Triggering Event" shall mean either the repayment in full of all
indebtedness under the Credit Agreement or the receipt by the Company of at
least $20 million in net cash proceeds from additional Equity.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of
such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise of
Warrants until such time as such shares of Common Stock have either been
(i) Transferred in a public offering pursuant to a registration statement
filed under the Securities Act or (ii) Transferred in a transaction exempt
from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof with all transfer restrictions
and restrictive legends with respect to such Common Stock being removed in
connection with such transaction. "Warrant Stock", for the purposes of
Section 9 hereof, shall have the meaning set forth in Section 9.1(b)
hereof.
"WS Holder" shall have the meaning set forth in Section 9.1(a) hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after August 31, 1997 and
until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise
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<PAGE> 16
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder (as determined pursuant to Section 2.2
below). In order to exercise this Warrant, in whole or in part, the Holder
shall (i) deliver to the Company at the Designated Office a written notice of
the Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of Common
Stock to be purchased, together with this Warrant and (ii) pay to the Company
the Warrant Price (the date on which both such delivery and payment shall have
first taken place being hereinafter sometimes referred to as the "Exercise
Date"). Such Exercise Notice shall be in the form of the subscription form
appearing at the end of this Warrant as Annex A, duly executed by the Holder or
its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five Business
Days thereafter, execute (or cause to be executed) and deliver (or cause to be
delivered) to the Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as the exercising Holder shall
reasonably request in the Exercise Notice and shall be registered in the name of
the Holder or such other name as shall be designated in the Exercise Notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current
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<PAGE> 17
Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly
endorsed by or accompanied by appropriate instruments of transfer duly executed
by the Holder or by the Holder's attorney duly authorized in writing. In the
event of any withholding of Warrant Stock or surrender of Common Stock pursuant
to clause (ii) or (iii) above where the number of shares whose Current Market
Price is equal to the Warrant Price is not a whole number, the number of shares
withheld by or surrendered to the Company shall be rounded up to the nearest
whole share and the Company shall make a cash payment to the Holder based on the
incremental fraction of a share being so withheld by or surrendered to the
Company in an amount determined in accordance with Section 2.3 hereof. For the
purpose of making payment of the Warrant Price, any Note surrendered to the
Company shall be deemed to have a value equal to 100% of the principal amount
thereof plus any interest accrued but unpaid thereon. If the Holder delivers a
Note with a deemed value that exceeds the Warrant Price, the Company shall
reissue to the Holder a new Note identical in all respects to the surrendered
Note except that the principal amount of such new Note shall be equal to the
principal amount that, together with any interest accrued but unpaid thereon, is
equal to the deemed value of the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
the shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant. Such new Warrant shall in all other respects
be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, issued without violation of any preemptive
rights and free and clear of all Liens (other than any created by actions of the
Holder). The Company shall pay all expenses in connection with, and all taxes
and other governmental charges that may be imposed with respect to, the issue or
delivery thereof, unless such tax or charge is imposed by law upon the Holder,
in which case such taxes or charges shall be paid by the Holder and the Company
shall reimburse the Holder therefor on an After-Tax Basis.
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<PAGE> 18
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
2.5. Limitation on Regulated Holder's Exercise. Notwithstanding
anything in this Warrant to the contrary, the Holder of this Warrant, if subject
to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may
exercise this Warrant only if the Notice of Exercise is accompanied by an
Opinion of Counsel of such Holder to the effect that, as of the date of delivery
of such opinion, no federal or state regulatory clearances are required for such
Holder to exercise this Warrant or, in the event any such federal or state
regulatory clearances are required prior to the exercise of this Warrant, to the
effect that all such clearances have been obtained or, if not then obtained,
that no statute or regulation or regulatory policy or guidelines known to such
counsel would by their terms preclude the obtaining of such clearances or make
it unlikely that such
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<PAGE> 19
clearances would be obtained or make it likely that such clearances would, if
obtained, contain material conditions adverse to such Holder. In the event that
federal or state regulatory clearances are required prior to the exercise of
this Warrant by the Holder hereof, the Company shall reasonably cooperate with
such Holder in providing such information to any regulatory agency as such
agency may reasonably require. In the event any such regulatory clearance is
withheld or denied, such Holder may continue to hold this Warrant until its
expiration or may sell or otherwise transfer this Warrant in accordance with the
terms hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the Designated Office, together with a written
assignment of this Warrant in the form of Annex B hereto duly executed by the
Holder or its agent or attorney. Upon such surrender and delivery, the Company
shall, subject to Section 8, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with
Section 8, may be exercised by the new Holder for the purchase of shares of
Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to compliance with the
applicable provisions of this Warrant, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the Designated Office, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the applicable provisions of this Warrant as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
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<PAGE> 20
3.3. Expenses. The Company shall prepare, issue and deliver at its
own expense any new Warrant or Warrants required to be issued under this Section
3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is
exercisable and the Exercise Price shall be subject to adjustment from time to
time as set forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time
the Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to
the number of shares of Common Stock Outstanding immediately after such
adjustment.
4.2. Issuance of Additional Shares of Common Stock.
(a) If at any time the Company shall issue or sell any shares of Common Stock
in a Subsequent Issuance for a consideration per share that is less than the
Exercise Price in effect immediately prior to such issuance or sale, then,
forthwith upon such issuance or sale, the Exercise Price shall be reduced to a
price calculated by dividing (1) an amount equal to the sum of (x) the
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<PAGE> 21
number of shares of Common Stock Outstanding immediately prior to such
Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the
aggregate consideration (determined in accordance with the provisions of Section
4.6 hereof), if any, received by the Company in connection with such Subsequent
Issuance, by (2) the total number of shares of Common Stock Outstanding
immediately after such Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any
Stock Purchase Rights or Convertible Securities to the extent that an adjustment
shall have been previously made hereunder in connection with the issuance of
such Stock Purchase Rights or Convertible Securities pursuant to the provisions
of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities.
(a) In the event that the Company shall at any time issue, sell or grant any
Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the
purpose of Section 4.2 above, the Company shall be deemed to have issued at that
time a number of shares of Common Stock equal to the maximum number of shares of
Common Stock (without giving effect to any antidilution provisions in such Stock
Purchase Rights) that are or may become issuable upon exercise of such Stock
Purchase Rights (or upon exercise of any Convertible Securities issuable upon
exercise of such Stock Purchase Rights) for a consideration per share equal to
(i) the aggregate consideration per share (determined in accordance with the
provisions of Section 4.6 hereof) received by the Company in connection with the
issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum
amount of such consideration per share receivable by the Company in connection
with the exercise of such Stock Purchase Rights (and the exercise of any
Convertible Securities issuable upon exercise of such Stock Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such
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<PAGE> 22
Convertible Securities for a consideration per share equal to (i) the aggregate
consideration per share (determined in accordance with the provisions of Section
4.6 hereof) received by the Company in connection with the issuance or sale of
such Convertible Securities plus (ii) the minimum amount of such consideration
per share receivable by the Company in connection with the exercise of such
conversion or exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall
have been made hereunder as the result of any issuance, sale or grant of any
Stock Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then in
effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase in
number of shares or decrease in consideration, but only if the effect of such
two-step readjustment is to reduce the Exercise Price below the Exercise Price
in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall
have been made hereunder as the result of any issuance, sale or grant of any
Stock Purchase Rights or Convertible Securities, any of such Stock Purchase
Rights or the rights of conversion or exchange associated with such Convertible
Securities shall expire by their terms or any of such Stock Purchase Rights or
Convertible Securities shall be repurchased by the Company or a Subsidiary
thereof for a consideration per underlying share of Common Stock not exceeding
the amount of such consideration received by the Company in connection with the
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities,
the Exercise Price then in effect shall forthwith be increased to the Exercise
Price that would have been in effect if such expiring Stock Purchase Rights or
rights of conversion or exchange or such repurchased Stock Purchase Rights
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<PAGE> 23
or Convertible Securities had never been issued. Similarly, if at any time
after any such adjustment of the Exercise Price shall have been made pursuant to
Section 4.2 (i) any additional consideration is received or becomes receivable
by the Company in connection with the issuance or exercise of such Stock
Purchase Rights or Convertible Securities or (ii) there is a reduction in the
conversion ratio applicable to such Convertible Securities so that fewer shares
of Common Stock will be issuable upon the conversion or exchange thereof or
there is a decrease in the number of shares of Common Stock issuable upon
exercise of such Stock Purchase Rights, the Exercise Price then in effect shall
be forthwith readjusted to the Exercise Price that would have been in effect had
such changes taken place at the time that such Stock Purchase Rights or
Convertible Securities were initially issued, granted or sold. In no event
shall any readjustment under this Section 4.3(d) affect the validity of any
shares of Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment
of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of shares of Common Stock issuable on the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
4.5. Reorganization, Reclassification, Merger, Con solidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or
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disposition of assets, (i) shares of common stock of the successor or acquiring
corporation or of the Company (if it is the surviving corporation) or (ii) any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property") are to be received by or distributed to the holders of Common Stock
of the Company who are holders immediately prior to such transaction, then the
Holder of this Warrant shall have the right thereafter to receive, upon exercise
of this Warrant, the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In such event, the aggregate Exercise Price
otherwise payable for the shares of Common Stock issuable upon exercise of this
Warrant shall be allocated among the shares of common stock and Other Property
receivable as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets in proportion to the respective fair
market values of such shares of common stock and Other Property as determined in
good faith by the Board of Directors of the Company. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which this Warrant thus becomes exercisable, which modifications
shall be as equivalent as practicable to the adjustments provided for in this
Section 4. For purposes of this Section 4.5, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class that
is not preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such
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<PAGE> 25
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.5 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.6. Determination of Consideration. For purposes of Sections 4.2,
4.3 and 4.4 hereof, the consideration received and/or receivable by the Company
in connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount received by the
Company after deduction of any accrued interest or dividends, expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Company.
(2) Securities or Other Property. In the case of securities or other
property, the fair market value thereof as of the date immediately
preceding such issuance, sale, grant or exercise as determined in good
faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares of Common
Stock are issued or sold together with other securities or other assets of
the Company for a consideration which covers both, the consideration
received (computed as provided in (1) and (2) above) shall be allocable to
such shares of Common Stock as determined in good faith by the Board of
Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and Convertible
Securities. In case any Stock Purchase Rights or Convertible Securities
shall be issued or sold together with other securities or other assets of
the Company, together comprising one integral transaction in which no
specific consideration is allocated to the Stock Purchase Rights or
Convertible Securities, the consideration allocable to such Stock
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<PAGE> 26
Purchase Rights or Convertible Securities shall be determined in good faith
by the Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company
payable in either case in Common Stock or Convertible Securities, such
Common Stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any shares of
Common Stock, Stock Purchase Rights or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor shall be
deemed to be the fair value on the date of issuance of such security of
such portion of the assets and business of the non-surviving corporation
attributable to such Common Stock, Stock Purchase Rights or Convertible
Securities, as is determined in good faith by the Company's Board of
Directors.
(7) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Majority Warrant
Holders, and any dispute shall be resolved by an investment banking or
appraisal firm of recognized national standing selected by the Company and
reasonably acceptable to the Majority Warrant Holders and whose decision
shall be binding on the Company and all holders of Warrants. The fees and
expenses of such firm shall be paid by the party or parties whose position
is not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to
which the other provisions of this Section 4 are not strictly applicable but as
to which the failure to make any adjustment would not fairly protect the
purchase rights repre-
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<PAGE> 27
sented by this Warrant in accordance with the essential intent and principles
hereof (including, without limitation, the issuance of securities other than
Common Stock which have the right to participate in distributions to the holders
of Common Stock, the granting of "phantom stock" rights or "stock appreciation
rights" or the repurchase of outstanding shares of Common Stock, Convertible
Securities or Stock Purchase Rights for a purchase price exceeding the fair
market value thereof), then, in each such case, the Majority Warrant Holders may
select an independent investment banking firm of nationally recognized standing
and reasonably acceptable to the Company to make a determination as to the
adjustment, if any, required to be made on a basis consistent with the essential
intent and principles established herein as a result of such event in order to
preserve the purchase rights represented by the Warrants. If the investment
bank selected by the Majority Warrant Holders is not reasonably acceptable to
the Company, and the Company and the Majority Warrant Holders cannot agree on a
mutually acceptable investment bank, then the Company and the Majority Warrant
Holders shall each choose one such investment bank and the respective chosen
firms shall jointly select a third investment bank, which shall make the
determination. The Company shall pay the costs and fees of each such investment
bank (including any such investment bank selected by the Majority Warrant
Holders), and the decision of the investment bank making such determination
shall be final and binding on the Company and all affected holders of Warrants
or Warrant Stock. Promptly after receipt of the opinion of such investment bank
as to any such required adjustments, the Company shall take any actions
necessary to implement same.
4.8. Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring such an adjustment shall occur. For the purpose of any such
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
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(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or
purchase Common Stock, Convertible Securities or Stock Purchase Rights,
then all references in this Section 4 to the date of the issuance or sale
of such shares of Common Stock, Convertible Securities or Stock Purchase
Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account
to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution to which the provisions of Section 4.1
would apply, but shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously
made in respect thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1 above,
at no time shall the Exercise Price per share of Common Stock exceed the
amount set forth in the first paragraph of the preamble of this Warrant.
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock to
be less than the Exercise Price that would result from such transaction.
(g) Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is
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exercisable or the Exercise Price shall be adjusted pursuant to this
Section 4, the Company shall forthwith prepare a certificate to be executed
by the President or chief financial officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the method by
which such adjustment was calculated, specifying the number of shares of
Common Stock for which this Warrant is exercisable and (if such adjustment
was made pursuant to Section 4.5) describing the number and kind of any
other shares of stock or Other Property for which this Warrant is
exercisable, and any related change in the Exercise Price, after giving
effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder in
accordance with Section 15.2. The Company shall keep at its principal
office or at the Designated Office, if different, copies of all such
certificates and cause the same to be available for inspection at said
office during normal business hours by any Holder or any prospective
transferee of a Warrant designated by a Holder thereof.
(h) Independent Application. Except as otherwise provided herein, all
subsections of this Section 4 are intended to operate independently of one
another (but without duplication). If an event occurs that requires the
application of more than one subsection, all applicable subsections shall
be given independent effect without duplication.
5. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or reasonably appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company shall take all such action as may be
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necessary or reasonably appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all Liens, and shall use all
commercially reasonably efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or (b) any
amendment of the Certificate of Incorporation of the Company, the Company shall
mail to each Holder of a Warrant in accordance with the provisions of Section
14.2 hereof a notice specifying the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer or disposition is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition,
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and a description in reasonable detail of the transaction. Such notice shall be
mailed to the extent practicable at least thirty, but not more than ninety, days
prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time,
except upon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares
of Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to such
an effective registration statement, shall be valid or effective unless (a) the
holder of the securities proposed to be transferred shall have delivered to the
Company either a no-action letter from the Commission or an Opinion of Counsel
to the effect that such proposed Transfer is exempt from the registration
requirements of the Securities Act or (b) such Transfer is being made pursuant
to Rule 144 or Rule 144A under the Securities Act and such holder shall have
delivered to the Company a certificate setting forth the basis for applying such
Rule to the proposed Transfer. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon any such Transfer, other than in a public
offering pursuant to an effective registration statement, shall bear the
restrictive legend set forth in
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Section 8.2(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 8.2(b), unless the Holder delivers to
the Company an Opinion of Counsel to the effect that such legend is not required
for the purposes of compliance with the Securities Act. Holders of the Warrants
or the Restricted Common Stock, as the case may be, shall not be entitled to
Transfer such Warrants or such Restricted Common Stock except in accordance with
this Section 8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the exercise
of this Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS
(A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
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"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Not withstanding
the foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant bearing
the following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED
IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND
ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed
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thereon. Wherever the restrictions imposed by this Section shall terminate as
to any share of Restricted Common Stock, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company, at the Company's expense,
a new certificate representing such Common Stock not bearing the restrictive
legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series A Warrants and the holders
of Warrant Stock (as defined in Section 9.1(b)) are collectively referred
to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series A Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with respect
to such Common Stock being removed in connection with such transaction,(ii)
any other securities issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange by the Company generally
for, or in replacement by the Company generally of, any shares of Warrant
Stock and (iii) any securities issued in exchange for any such Warrant
Stock in any merger or reorganization of the Company, but in the cases of
clauses (ii) and (iii) only so long as such securities have not been
registered and Transferred pursuant to the Securities Act or Transferred in
a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions and restrictive legends with respect to such
securities are removed in connection with such Transfer.
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(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series A Warrants held by
such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed "outstanding"
as of a specified date will be equal to (i) the total number of shares of
Warrant Stock Outstanding as of such date plus (ii) the number of shares of
Warrant Stock issuable upon exercise of all outstanding Warrants and Series
A Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series A
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives at
any time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares of
Warrant Stock then outstanding (the "Demanding Holders") that the Company file a
registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration will
be for an offering on a delayed or continual basis pursuant to Rule 415 under
the Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration,
the Company shall:
(1) File the requested registration statement with the
Commission as promptly as practicable, and shall use all commercially
reasonable efforts to have the registration declared effective under the
Securities Act as soon as reasonably practicable, in each instance giving
due
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regard to the need to prepare and file current financial statements,
conduct due diligence and complete other actions that are reasonably
necessary to effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand Registration,
for up to 90 days or until such earlier date as of which all Registrable
Securities covered by such registration statement shall have been disposed
of in the manner described in the registration statement, and (y) if a
Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any
reason the effectiveness of a Demand Registration is suspended or postponed
as permitted by Subsection (d) below, the foregoing period shall be
extended by the aggregate number of days of such suspension or
postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be deemed
to have been effected (i) unless a registration statement with respect thereto
has become effective, (ii) if after such registration statement has become
effective, such registration or the related offer, sale or distribution of
Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Selling Holders and such
interference is not thereafter eliminated or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in connection with
such registration are not satisfied or waived, other than by reason of a failure
on the part of the Selling Holders. If the Company shall have complied with its
obligations under this Section 9, a right to demand a registration pursuant to
this Section 9.2 shall be deemed to have been satisfied (i) if a Demand
Registration other than a Shelf Registration, upon the earlier of (x) the date
as of which all of the Registrable Securities included therein shall have been
disposed of pursuant to the registration statement and (y) the date as of which
such Demand Registration shall have been Continuously Effective for a period of
90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order, or
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proceedings for such an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in
accordance with the intended method or methods of disposition specified in the
request made pursuant to Subsection (a) above. If any registration pursuant to
this Section 9.2 involves an underwritten offering (whether on a "firm", "best
efforts" or "all reasonable efforts" basis or otherwise), or an agented
offering, the Majority Selling Holders shall have the right to select the
underwriter or underwriters and manager or managers to administer such
underwritten offering or the placement agent or agents for such agented offering
from among the entities listed in Schedule B hereto (or any successors of any
such entities), it being understood that the Majority Selling Holders shall use
commercially reasonable efforts to select one or more of the first three listed
entities subject to arriving at reasonably acceptable terms and conditions for
the offering.
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(f) The Company may elect to include shares of Common Stock to be sold
for its account in any such Demand Registration (including a Shelf
Registration); provided, however, if the managing underwriter shall advise the
Demanding Holders in writing (with a copy to the Company) that, in its opinion,
the number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be realized
therefor, or the timing thereof, then the number of shares proposed to be
included in such Demand Registration by the Company shall be reduced, to such
number that the Demanding Holders are advised can be sold without such effect in
such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders of the Company other than the WS Holders) equity
securities under the Securities Act in connection with the public offering
solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms),
the Company shall promptly give each WS Holder written notice of such
registration (a "Piggyback Registration"). Upon the written request of each WS
Holder given within 20 days following the date of such notice, the Company shall
cause to be included in such registration statement and use its best efforts to
be registered under the Securities Act all the Registrable Securities that each
such WS Holder shall have requested to be registered. The Company shall have
the absolute right to withdraw or cease to prepare or file any registration
statement for any offering referred to in this Section 9.3 without any
obligation or liability to any WS Holder.
(b) If the managing underwriter shall advise the Company in writing
(with a copy to each Selling Holder) that, in its opinion, the amount of
Registrable Securities requested to be included in such registration would
materially adversely affect such offering, or the timing thereof, then the
Company will include in such registration, to the extent of the amount and class
which the Company is so advised can be sold without such material adverse effect
in such offering: first, all securities proposed to be sold by the Company for
its own account; and second, the Warrant Stock requested to be included in such
registration by WS Holders and all other securities requested to be included in
such registration by Persons other than the Company and WS Holders, the
securities covered by this clause
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second to be included pro rata based on the estimated gross proceeds from the
sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable
Securities included in an unlimited number of Piggyback Registrations pursuant
to this Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement
with respect to such Warrant Stock and use the Company's best efforts to
cause such registration statement to become effective; provided, however,
that before filing a registration statement or prospectus or any amendments
or supplements thereto, including documents incorporated by reference after
the initial filing of the registration statement and prior to effectiveness
thereof, the Company shall furnish to one firm of counsel for the Selling
Holders (selected by Majority Selling Holders) copies of all such documents
in the form substantially as proposed to be filed with the Commission at
least four Business Days prior to filing for review and comment by such
counsel, which opportunity to comment shall include an absolute right to
control or contest disclosure if the applicable Selling Holder reasonably
believes that it may be subject to controlling person liability under
applicable securities laws with respect thereto.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with respect
to the disposition of all securities covered by such registration
statement. If the registration is for an underwritten offering, the
Company shall amend the registration
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statement or supplement the prospectus whenever required by the terms
of the underwriting agreement entered into pursuant to Section 9.4(e).
Subject to Rule 415 under the Securities Act, if the registration statement
is a Shelf Registration, the Company shall amend the registration statement
or supplement the prospectus so that it will remain current and in
compliance with the requirements of the Securities Act for 270 days or
after its effective date, and if during such period any event or
development occurs as a result of which the registration statement or
prospectus contains a misstatement 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, the Company shall promptly notify each
Selling Holder, amend the registration statement or supplement the
prospectus so that each will thereafter comply with the Securities Act and
furnish to each Selling Holder of Registrable Securities such amended or
supplemented prospectus, which each such Holder shall thereafter use in the
Transfer of Warrant Stock covered by such registration statement. Pending
such amendment or supplement each such Selling Holder shall cease making
offers or Transfers of Registerable Securities pursuant to the prior
prospectus. In the event that any Registrable Securities included in a
registration statement subject to, or required by, this Warrant remain
unsold at the end of the period during which the Company is obligated to
use its best efforts to maintain the effectiveness of such registration
statement, the Company may file a post- effective amendment to the
registration statement for the purpose of removing such Registrable
Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities, without
charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each preliminary prospectus and any amendments or supplements
thereto, in each case in conformity with the requirements of the Securities
Act and the rules thereunder, and such other related documents as any such
Selling Holder may reasonably request in order to facilitate the
disposition of Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states or jurisdictions as shall
be reasonably requested by the managing underwriter (as applicable, or if
inapplicable, the Majority Selling
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Holders), and (ii) to obtain the withdrawal of any order suspending
the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the
offer and transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service
of process in any such states or jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not be
required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and take
all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
(g) Make generally available to the Company's security holders copies
of all periodic reports, proxy statements, and other information referred
to in Section 9.9(a) and an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 90 days following the end
of the 12-month period beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of each
registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and underwriter
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(but not more than one firm of counsel to such Selling Holders), all
financial and other information as shall be reasonably requested by them,
and provide the Selling Holder, any underwriter participating in such
offering and the representatives of such Selling Holder and underwriter the
opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have certified
the audited financial statements included in such registration statement,
in each case all as necessary to enable them to exercise their due
diligence responsibility under the Securities Act; provided, however, that
information that the Company determines, in good faith, to be confidential
and which the Company advises such Person in writing, is confidential shall
not be disclosed unless such Person signs a confidentiality agreement
reasonably satisfactory to the Company or the related Selling Holder of
Registrable Securities agrees to be responsible for such Person's breach of
confidentiality on terms reasonably satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of the
type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company shall
furnish to each Selling Holder a signed counterpart of any such comfort
letter or legal opinion. Delivery of any such opinion or comfort letter
shall be subject to the recipient furnishing such written representations
or acknowledgments as are customarily provided by selling shareholders who
receive such comfort letters or opinions.
(j) Provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a
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recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered
with or approved by such other United States or state governmental agencies
or authorities as may be necessary by virtue of the business and operations
of the Company to enable the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number
for the Common Stock prior to the effective date of the first registration
statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 9 with respect to the Registrable Securities of any Selling Holder that
such Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Selling Holder's Registrable Securities, and to
cooperate with the Company in preparing such registration; and
(ii) Agree to sell their Registrable Securities to the underwriters
at the same price and on substantially the same terms and conditions as the
Company or the other Persons on whose behalf the registration statement was
being filed have agreed to sell their securities, and to execute the
underwriting agreement agreed to by the Majority Selling Holders (in the
case of a registration under Section 9.2) or the Company and the Majority
Selling Holders (in the case of a registration under Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of such
Selling Holder's shares registered for sale pursuant to this Section 9;
provided, however, it is
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understood that any failure so to notify the Company shall not be deemed a
default hereunder or to subject any Selling Holder to any claim for damages
or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all fees
and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the Company,
and of the Company's independent public accountants, including the expenses
of "cold comfort" letters required by or incident to such performance and
compliance, and the reasonable fees and disbursements of one firm of
counsel for the Selling Holders of Registrable Securities (the
"Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the Company
shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense), unless WS Holders
whose Registrable Securities constitutes a majority of the Registrable
Securities then outstanding agree that such withdrawn registration shall
constitute the exercise of their one demand registration under Section 9.2
hereof. The counsel for the Selling Holders shall be selected by Demanding
Holders owning a majority of the Registrable Securities owned by Demanding
Holders to be included in a Demand Registration and, in the case of a
Piggyback Registration, by Selling Holders owning a majority of the
Registrable Securities to be included in such registration; provided that
in the case of a Piggyback Registration, the Selling Holders shall use one
firm of counsel to represent all such holders and shall endeavor in
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good faith, with any other holders of securities to be included in such
registration, to select one firm of counsel to represent all such selling
securities holders.
(b) The Company shall bear and pay all Registration Expenses incurred
in connection with any Piggyback Registrations pursuant to Section 9.3 for
each Selling Holder, but excluding underwriting discounts and commissions
relating to Registrable Securities (which shall be paid on a pro rata
basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities
are included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, and
each officer, director, partner, and employee of such Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may become subject
under the Securities Act, the Exchange Act or other federal or state laws,
insofar as such losses, claims, damages, liabilities and expenses arise out
of or are based upon any of the following statements, omissions or
violations pursuant to a final non-appealable order (collectively a
"Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any
amendments or supplements thereto;
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(ii) 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; or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any applicable state securities law
or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any applicable state securities law;
provided, however, that the indemnification required by this Section 9.7(a)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or expense to the extent that it is determined by a court
of competent jurisdiction by a final non-appealable order to have solely
arisen out of or be based upon a Violation which occurred in reliance upon
and in conformity with written information furnished to the Company by the
indemnified party expressly for use in connection with such registration;
provided, further, that the indemnity agreement contained in this Section
9.7(a) shall not apply to any underwriter to the extent that any such loss
is based on or arises out of an untrue statement or alleged untrue
statement of a material fact, or an omission or alleged omission to state a
material fact, contained in or omitted from any preliminary prospectus if
the final prospectus shall correct such untrue statement or alleged untrue
statement, or such omission or alleged omission, and a copy of the final
prospectus has not been sent or given to such person at or prior to the
confirmation of sale to such person if such underwriter was under an
obligation to deliver such final prospectus and failed to do so. The
Company shall also indemnify underwriters, selling brokers, dealer managers
and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each
person who controls such persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Selling Holders.
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(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors, each
of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling Holder,
any controlling Person of any such other Selling Holder and each officer,
director, partner, and employee of such other Selling Holder and such
controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other federal
or state laws, insofar as such losses, claims, damages, liabilities and
expenses are determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation that occurred in reliance upon and in conformity with written
information furnished by such Selling Holder expressly for use in
connection with such registration; provided, however, that (x) the
indemnification required by this Section 9.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or expense if
settlement is effected without the consent of the relevant Selling Holder
of Registrable Securities, which consent shall not be unreasonably
withheld, and (y) in no event shall the amount of any indemnity under this
Section 9.7(b) exceed the net proceeds from the applicable offering
received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this Section
9.7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified
party may make a claim under this Section 9.7, such indemnified party shall
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that
an indemnified party shall have the
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right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time following the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under
this Section 9.7 but shall not relieve the indemnifying party of any
liability that it may have to any indemnified party otherwise than pursuant
to this Section 9.7. Any reasonable fees and expenses incurred by the
indemnified party (including any fees and expenses incurred in connection
with investigating or preparing to defend such action or proceeding) shall
be paid to the indemnified party, as incurred, within thirty (30) days of
written notice thereof to the indemnifying party (regardless of whether it
is ultimately determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall have the
right to employ separate counsel in any such action, claim or proceeding
and to participate in the defense thereof, but the fees and expenses of
such counsel shall be the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any such action,
claim or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified party
shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or in addition to those
available to the indemnifying party and that the assertion of such defenses
would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such
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<PAGE> 49
action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection
with any one such action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the reasonable fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time for all
such indemnified parties, unless in the reasonable judgment of such
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such
action, claim or proceeding, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or
counsels). No indemnifying party shall be liable to an indemnified party
for any settlement of any action, proceeding or claim without the written
consent of the indemnifying party, which consent shall not be unreasonably
withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified
parties in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any Violation has been
committed by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such
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<PAGE> 50
Violation. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault of
such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred. In the event that it shall be
subsequently determined that the recipient of any such periodic payment
shall not be entitled to indemnification hereunder, such recipient promptly
shall repay such payments, together with interest thereon at the Agreed
Rate from the date of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the completion
of any offering of Registrable Securities pursuant to a registration
statement under this Section 9, and otherwise.
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9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to
have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities or
Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or agented
registration), during the 5-day period prior to, and during the 45-day period
beginning on, the date such registration statement is declared effective under
the Securities Act by the Commission, provided that such WS Holder is timely
notified of such effective date in writing by the Company or such managing
underwriter.
9.9. Additional Covenants of the Company. The Company hereby agrees
and covenants as follows:
(a) The Company shall file as and when applicable, on a timely basis,
all reports required to be filed by it under the Exchange Act. If the
Company is not required to file reports pursuant to the Exchange Act, upon
the request of any WS Holder, the Company shall make publicly available the
information specified in subparagraph (c)(2) of Rule 144 of the Securities
Act, and take such further action as may be reasonably required from time
to time and as may be within the reasonable control of the Company, to
enable the WS Holders to Transfer Warrants or Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the Securities Act or any similar
rule or regulation hereafter adopted by the Commission. In addition,
promptly upon the request of any WS Holder, the Company shall provide such
WS Holder with such publicly available financial statements, reports and
other information as may be required to permit such WS Holder to Transfer
shares of Registrable Securities to Qualified Institutional Investors
pursuant to Rule 144A of the Securities Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Common Stock, Convertible Securities or Stock Purchase Rights during the 5
Business Days prior to, and during the 90-day period beginning on,
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<PAGE> 52
the commencement of a public distribution of Registrable Securities
pursuant to any registration statement prepared pursuant to this Section 9
(other than by the Company pursuant to such registration if the
registration is pursuant to Section 9.3 or by the Company pursuant to any
dividend reinvestment plan offered by it to its stockholders). The Company
shall not effect any registration of its securities (other than on Form
S-4, Form S-8, or any successor forms to such forms or pursuant to such
other registration rights agreements as may be approved in writing by the
Majority Selling Holders) or effect any public or private sale or
distribution of any of its securities, including a sale pursuant to
Regulation D under the Securities Act, whether on its own behalf or at the
request of any holder or holders of such securities from the date of a
request for a Demand Registration pursuant to Section 9.2 until 90 days
following the effective date of such Demand Registration statement, unless
the Company shall have previously notified in writing all Selling Holders
of the Company's desire to do so, and the Majority Selling Holders or the
managing underwriter, if any, shall have consented thereto in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant
to which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or other
agreement) shall contain a provision whereby any holder receiving such
Common Stock who will hold more than one percent (1%) of the amount of such
Common Stock then outstanding shall agree not to effect any public sale or
distribution of any such Common Stock during the periods described in the
second sentence of Section 9.9(b), in each case including a sale pursuant
to Rule 144 under the Securities Act (unless such Person is prevented by
applicable statute or regulation from entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer or
agree to Transfer all or substantially all the Company's assets,
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<PAGE> 53
unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively, shall
have agreed in writing to assume the obligations of the Company under this
Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the WS Holders
would be entitled to receive in exchange for Registrable Securities
pursuant to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of The First National Bank of Chicago shall be a sufficient indemnity) and,
in case of mutilation, upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, in the case of mutilation, no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company at
Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States by
notice given to all registered holders of Warrants at least ten Business Days
prior to the effective date of such change.
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12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular and periodic
reports, proxy statements (other than preliminary) and registration
statements (other than registration statements on Forms S-3 (relating to
debt securities) and S-8) which the Company may file with the Securities
and Exchange Commission or any governmental agency substituted therefor.
(ii) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available by
the Company to the holders of any class of its securities generally or by
any Subsidiary of the Company to the holders of any class of its securities
generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice
(the "Call Notice") to the Holders of all outstanding Warrants given at any time
on or after the date of the occurrence of the Triggering Event and before August
31, 1997, to repurchase on the date specified in the notice from each Holder of
a Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series B Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series B Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender
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of this Warrant at the Designated Office against payment of the repurchase price
therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or communication hereunder to be made pursuant
to the provisions of this Warrant shall be sufficiently given or made if in
writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
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limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon
the exercise hereof from and against any and all liability, loss, cost, damage,
reasonable attorneys' and accountants' fees and expenses, court costs and all
other out-of-pocket expenses incurred in connection with or arising from a
Company Default. This indemnification provision shall be in addition to the
rights of such Holder or Holders to bring an action against the Company for
breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence
of affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provi sions of Sections
3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and, in the case of Section 9, all Holders of shares of Warrant
Stock issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
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14.7. Amendment. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and the Majority Warrant Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the written consent of the Holder thereof.
14.8. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS
SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED,
THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD
BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 59
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 60
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.7
================================================================================
SERIES B WARRANT
to Purchase Common Stock of
NORAND CORPORATION
================================================================================
Warrant No. B - 2
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 13
3.1. Transfer 13
3.2. Division and Combination 14
3.3. Expenses 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and Convertible
Securities 15
4.4. Adjustment of Number of Shares Purchasable 17
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets 17
4.6. Determination of Consideration 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under
this Section 20
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions 23
7.2 Closing of Transfer Books 23
8. TRANSFER RESTRICTIONS 23
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
-i-
<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures 30
9.5. Selling Holders' Obligations 34
9.6. Expenses of Registration 34
9.7. Indemnification; Contribution 35
9.8. Holdback 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment 45
14.8. Severability 45
14.9. Headings 45
14.10. GOVERNING LAW; JURISDICTION 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
-ii-
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SCHEDULE B UNDERWRITERS AND AGENTS
iii
<PAGE> 5
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY
OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE
TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION
OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT
OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER
THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE
PROPOSED TRANSFER.
Warrant No. B - 2
SERIES B WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT CAISSE NATIONALE DE CREDIT AGRICOLE, or registered
assigns, is entitled, at any time after August 31, 1997 and prior to the
Expiration Date (such term, and certain other capitalized terms used herein
being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware
corporation (the "Company"), Sixty-nine Thousand One Hundred Sixteen (69,116)
shares of the Common Stock of the Company (subject to adjustment as provided
herein), at a purchase price of $21.15 per share (the initial "Exercise Price",
subject to adjustment as provided herein), all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
<PAGE> 6
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings
set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any
class of voting stock of such Person and has the power to vote such
shares or (c) more than ten percent of the outstanding shares of any
class of voting stock (or, in the case of a Person which is not a
corporation, more than ten percent of the equity interest) of which is
beneficially owned or held by such Person and such Person has the power
to vote such shares or equity interest. The term "control" as used with
respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate
base rate of interest announced by The First National Bank of Chicago
from time to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined
by an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and
conditions for the
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appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination
of Appraised Value shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company
taken as a whole, based on the higher of (A) the value derived from a
hypothetical sale of the entire Company as a going concern by a willing
seller to a willing buyer (neither acting under any compulsion) and (B)
the liquidation value of the entire Company. No discount shall be
applied on account of (i) any Warrants or Warrant Stock representing a
minority interest, (ii) any lack of liquidity of the Common Stock or the
Warrants, (iii) the fact that the Warrants or Warrant Stock may
constitute "restricted securities" for securities law purposes or (iv)
the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation
(as defined in Section 4.5 hereof) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated
by Section 4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the
Company to comply in any material respect with any covenant of the
Company contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and
available for Transfers of Warrant Stock thereunder for the longer of
either (i) any ten consecutive Business Days, or (ii) an aggregate of
fifteen Business Days during the period specified in the relevant
provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are
convertible into or exchangeable for, with or without payment of
additional consideration in cash or property, shares of Common Stock,
either immediately or upon the occurrence of a specified date or a
specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the
Lenders party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for
the shorter of (x) the twenty consecutive Business Days immediately
preceding such date or (y) the period commencing on the Business Day next
following the first public announcement of any event giving rise to an
adjustment of the Exercise Price pursuant to Section 4 below
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and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a
National Market System security, the last sale price, regular way, on
such day on the principal stock exchange or market system on which such
Common Stock is then listed or admitted to trading, or, if no such sale
takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day as reported on such stock exchange or
market system or (ii) if the Common Stock is not then listed or admitted
to trading on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter,
the average of the closing bid and asked prices for the Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National
Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section
9.2(a) hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms
of which equity capital are acceptable to the Majority Warrant Holders)
raised by and/or contributed to the Company subsequent to the Original
Issue Date or new Indebtedness (as defined in the Credit Agreement)
subordinated to the Obligations (as defined in the Credit Agreement),
provided the terms of such Indebtedness (including, without limitation,
maturity, amortization, covenants, defaults, remedies and subordination
provisions) are acceptable to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time
to time.
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"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to
Section 4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under
the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date
shall mean (A) if the Common Stock is publicly traded on such date, the
Current Market Price per share or (B) if the Common Stock is not publicly
traded on such date, (1) the fair market value per share of Common Stock
as determined in good faith by the Board of Directors of the Company and
set forth in a written notice to each Holder or (2) if the Majority
Warrant Holders object in writing to such price as determined by the
Board of Directors within thirty days after receiving notice of same, the
Appraised Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to
be determined, all shares of Common Stock Outstanding on such date and
all shares of Common Stock issuable in respect of (x) the Warrants
outstanding on such date, (y) any Convertible Securities outstanding on
such date and (z) any other Stock Purchase Rights outstanding on such
date, in each case regardless of whether or not the conversion, exchange,
subscription or purchase rights associated with such Convertible
Securities or Stock Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or
entailing a finding, that the Company is insolvent or bankrupt, or
seeking reorganization, liquidation, dissolution, winding-up, charter
revocation or other similar relief with respect to the Company or any of
its properties, assets or debts, or seeking the appointment of a
receiver, trustee, custodian, liquidator, sequestrator or similar
official for the Company or any of its properties or assets, or the
Company becoming insolvent or bankrupt or generally unable to pay its
debts as they become due, or the Company voluntarily suspending its
business or making a general assignment for the benefit of creditors;
provided that an Insolvency Event shall not be deemed to have occurred on
account of any such proceeding which is involuntary on the part of the
Company unless same shall not have been dismissed or stayed within 60
days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement perfecting a security interest under the
Uniform Commercial Code or comparable law of any jurisdiction).
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"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock
(with any such Warrants being deemed to represent, for the purposes of
such calculation, the shares of Warrant Stock then issuable upon
exercise thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced
in Securities Act or bank regulatory matters, as the case may be, chosen
by the Holder of this Warrant or Warrant Stock issued upon the exercise
hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary thereof, and shall
include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Outstanding", when used with respect to Warrant Stock for the purposes
of Section 9 hereof shall have the meaning set forth in Section 9.1(d)
hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth
in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Holders" shall mean, with respect to a specified
registration under Section 9 hereof, WS Holders whose Registrable
Securities are included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with this
Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with,
and having the same terms (other than the number of shares purchasable
upon the exercise thereof) as, this Warrant.
"Settlement Stock" shall mean the shares of Common Stock
contemplated to be issued in settlement of the pending shareholders'
claims against the Company with respect to the litigation styled In re
Norand Corporation Securities Litigation, Master File No. C95-323,
pending in the United States District Court for the Northern District of
Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in Section
2.1(c) hereof.
"Shelf Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after
the Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the
Warrants and any issuance of Common Stock, Convertible Securities
or Stock Purchase Rights (and
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any issuance of Common Stock pursuant to the conversion, exchange
or exercise of any such Convertible Securities or
Stock Purchase Rights) deemed to have been issued as of the
Original Issue Date pursuant to the definition of Fully Diluted
Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant
(other than warrants granted to Jay Alix and Associates and to
Donald W. Rowley for up to the respective number of shares set
forth on Schedule A) granted or issued after the Original Issue
Date shall not be less than the "daily market price" (as that term
is defined in the definition of Current Market Price) of the Common
Stock on the date of grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights
with respect to which the Majority Warrant Holders shall have
waived application of the provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or
more Subsidiaries, or any other business entity in which the Company or
one or more Subsidiaries or the Company and one or more Subsidiaries own
more than a 50% interest either in the profits or capital of such
business entity or (b) whose net earnings, or portions thereof, are
consolidated with the net earnings of the Company and are recorded on the
books of the Company for financial reporting purposes in accordance with
GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a
"sale" thereof within the meaning of the Securities Act.
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"Triggering Event" shall mean either the repayment in full of all
indebtedness under the Credit Agreement or the receipt by the Company of
at least $20 million in net cash proceeds from additional Equity.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as
of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise
of Warrants until such time as such shares of Common Stock have either
been (i) Transferred in a public offering pursuant to a registration
statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof with all
transfer restrictions and restrictive
legends with respect to such Common Stock being removed in connection
with such transaction. "Warrant Stock", for the purposes of Section 9
hereof, shall have the meaning set forth in Section 9.1(b) hereof.
"WS Holder" shall have the meaning set forth in Section 9.1(a)
hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after August 31, 1997 and
until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of
this Warrant may from time to time exercise
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this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder (as determined pursuant to Section 2.2
below). In order to exercise this Warrant, in whole or in part, the Holder
shall (i) deliver to the Company at the Designated Office a written notice of
the Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of
Common Stock to be purchased, together with this Warrant and (ii) pay to the
Company the Warrant Price (the date on which both such delivery and payment
shall have first taken place being hereinafter sometimes referred to as the
"Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly
executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a
certified or official bank check in the amount of such Warrant Price, (ii) by
instructing the Company to withhold a number of shares of Warrant Stock then
issuable upon exercise of this Warrant with an aggregate Current Market Price
equal to such Warrant Price (the "Share Withholding Option"), (iii) by
surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate Current
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Market Price equal to such Warrant Price or (iv) by delivery of a Note, duly
endorsed by or accompanied by appropriate instruments of transfer duly executed
by the Holder or by the Holder's attorney duly authorized in writing. In the
event of any withholding of Warrant Stock or surrender of Common Stock pursuant
to clause (ii) or (iii) above where the number of shares whose Current Market
Price is equal to the Warrant Price is not a whole number, the number of shares
withheld by or surrendered to the Company shall be rounded up to the nearest
whole share and the Company shall make a cash payment to the Holder based on
the incremental fraction of a share being so withheld by or surrendered to the
Company in an amount determined in accordance with Section 2.3 hereof. For the
purpose of making payment of the Warrant Price, any Note surrendered to the
Company shall be deemed to have a value equal to 100% of the principal amount
thereof plus any interest accrued but unpaid thereon. If the Holder delivers a
Note with a deemed value that exceeds the Warrant Price, the Company shall
reissue to the Holder a new Note identical in all respects to the surrendered
Note except that the principal amount of such new Note shall be equal to the
principal amount that, together with any interest accrued but unpaid thereon,
is equal to the deemed value of the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, issued without violation of any
preemptive rights and free and clear of all Liens (other than any created by
actions of the Holder). The Company shall pay all expenses in connection with,
and all taxes and other governmental charges that may be imposed with respect
to, the issue or delivery thereof, unless such tax or charge is imposed by law
upon the Holder, in which case such taxes or charges shall be paid by the
Holder and the Company shall reimburse the Holder therefor on an After-Tax
Basis.
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2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights
under which are exercised in the same transaction, would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of the
Current Market Price of one share of Common Stock on the Exercise Date, if the
Common Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything
in this Warrant to the contrary, the Holder of this Warrant, if subject to the
Bank Holding Company Act or any provision of the Glass-Steagall Act, may
exercise this Warrant only if the Notice of Exercise is accompanied by an
Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such
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clearances would be obtained or make it likely that such clearances would, if
obtained, contain material conditions adverse to such Holder. In the event
that federal or state regulatory clearances are required prior to the
exercise of this Warrant by the Holder hereof, the Company shall reasonably
cooperate with such Holder in providing such information to any regulatory
agency as such agency may reasonably require. In the event any such regulatory
clearance is withheld or denied, such Holder may continue to hold this Warrant
until its expiration or may sell or otherwise transfer this Warrant in
accordance with the terms hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to compliance with the applicable
provisions of this Warrant, this Warrant may be divided or combined with other
Warrants upon presentation hereof at the Designated Office, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with the applicable provisions of this Warrant as to any transfer
which may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
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<PAGE> 21
3.3. Expenses. The Company shall prepare, issue and deliver at
its own expense any new Warrant or Warrants required to be issued under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to
the number of shares of Common Stock Outstanding immediately after such
adjustment.
4.2. Issuance of Additional Shares of Common Stock.
(a) If at any time the Company shall issue or sell any shares of Common Stock
in a Subsequent Issuance for a consideration per share that is less than the
Exercise Price in effect immediately prior to such issuance or sale, then,
forthwith upon such issuance or sale, the Exercise Price shall be reduced to a
price calculated by dividing (1) an amount equal to the sum of (x) the
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number of shares of Common Stock Outstanding immediately prior to such
Subsequent Issuance multiplied by the then existing Exercise Price, plus
(y) the aggregate consideration (determined in accordance with the provisions
of Section 4.6 hereof), if any, received by the Company in connection with such
Subsequent Issuance, by (2) the total number of shares of Common Stock
Outstanding immediately after such Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a)
In the event that the Company shall at any time issue, sell or grant any Stock
Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose
of Section 4.2 above, the Company shall be deemed to have issued at that time a
number of shares of Common Stock equal to the maximum number of shares of
Common Stock (without giving effect to any antidilution provisions in such
Stock Purchase Rights) that are or may become issuable upon exercise of such
Stock Purchase Rights (or upon exercise of any Convertible Securities issuable
upon exercise of such Stock Purchase Rights) for a consideration per share
equal to (i) the aggregate consideration per share (determined in accordance
with the provisions of Section 4.6 hereof) received by the Company in
connection with the issuance, sale or grant of such Stock Purchase Rights plus
(ii) the minimum amount of such consideration per share receivable by the
Company in connection with the exercise of such Stock Purchase Rights (and the
exercise of any Convertible Securities issuable upon exercise of such Stock
Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such
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<PAGE> 23
Convertible Securities for a consideration per share equal to (i) the aggregate
consideration per share (determined in accordance with the provisions of
Section 4.6 hereof) received by the Company in connection with the issuance
or sale of such Convertible Securities plus (ii) the minimum amount of such
consideration per share receivable by the Company in connection with the
exercise of such conversion or exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or
the rights of conversion or exchange associated with such Convertible
Securities shall expire by their terms or any of such Stock Purchase Rights
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<PAGE> 24
or Convertible Securities shall be repurchased by the Company or a Subsidiary
thereof for a consideration per underlying share of Common Stock not exceeding
the amount of such consideration received by the Company in connection with the
issuance, sale or grant of such Stock Purchase Rights or Convertible
Securities, the Exercise Price then in effect shall forthwith be increased to
the Exercise Price that would have been in effect if such expiring Stock
Purchase Rights or rights of conversion or exchange or such repurchased Stock
Purchase Rights or Convertible Securities had never been issued. Similarly, if
at any time after any such adjustment of the Exercise Price shall have been
made pursuant to Section 4.2 (i) any additional consideration is received or
becomes receivable by the Company in connection with the issuance or exercise
of such Stock Purchase Rights or Convertible Securities or (ii) there is a
reduction in the conversion ratio applicable to such Convertible Securities so
that fewer shares of Common Stock will be issuable upon the conversion or
exchange thereof or there is a decrease in the number of shares of Common Stock
issuable upon exercise of such Stock Purchase Rights, the Exercise Price then
in effect shall be forthwith readjusted to the Exercise Price that would have
been in effect had such changes taken place at the time that such Stock
Purchase Rights or Convertible Securities were initially issued, granted or
sold. In no event shall any readjustment under this Section 4.3(d) affect the
validity of any shares of Warrant Stock issued upon any exercise of this
Warrant prior to such readjustment, nor shall any such readjustment have the
effect of increasing the Exercise Price above the Exercise Price that would
have been in effect if the related Stock Purchase Rights or Convertible
Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of
the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
4.5. Reorganization, Reclassification, Merger, Con solidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or
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<PAGE> 25
disposition of assets, (i) shares of common stock of the successor or acquiring
corporation or of the Company (if it is the surviving corporation) or (ii) any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property") are to be received by or distributed to the holders of Common Stock
of the Company who are holders immediately prior to such transaction, then the
Holder of this Warrant shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In such event, the aggregate Exercise Price
otherwise payable for the shares of Common Stock issuable upon exercise of this
Warrant shall be allocated among the shares of common stock and Other Property
receivable as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets in proportion to the respective fair
market values of such shares of common stock and Other Property as determined
in good faith by the Board of Directors of the Company. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which this Warrant thus becomes exercisable, which
modifications shall be as equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.5, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class that is not preferred as to dividends or assets over any other class
of stock of such corporation and that is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such
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<PAGE> 26
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 4.5
shall similarly apply to successive reorganizations, reclassifications,
mergers, consolidations or disposition of assets.
4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3
and 4.4 hereof, the consideration received and/or receivable by the Company in
connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any accrued interest or
dividends, expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company.
(2) Securities or Other Property. In the case of securities
or other property, the fair market value thereof as of the date
immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares
of Common Stock are issued or sold together with other securities
or other assets of the Company for a consideration which covers
both, the consideration received (computed as provided in (1) and
(2) above) shall be allocable to such shares of Common Stock as
determined in good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or
Convertible Securities shall be issued or sold together with other
securities or other assets of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to the Stock Purchase Rights or Convertible Securities,
the consideration allocable to such Stock
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<PAGE> 27
Purchase Rights or Convertible Securities shall be determined in
good faith by the Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or
Convertible Securities, such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or
sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights
or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor shall be deemed
to be the fair value on the date of issuance of such security of
such portion of the assets and business of the non-surviving
corporation attributable to such Common Stock, Stock Purchase
Rights or Convertible Securities, as is determined in good faith
by the Company's Board of Directors.
(7) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good faith
by the Majority Warrant Holders, and any dispute shall be resolved
by an investment banking or appraisal firm of recognized national
standing selected by the Company and reasonably acceptable to the
Majority Warrant Holders and whose decision shall be binding on
the Company and all holders of Warrants. The fees and expenses of
such firm shall be paid by the party or parties whose position is
not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights repre-
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<PAGE> 28
sented by this Warrant in accordance with the essential intent and
principles hereof (including, without limitation, the issuance of securities
other than Common Stock which have the right to participate in distributions to
the holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
4.8. Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
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(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase
Rights, then all references in this Section 4 to the date of the issuance
or sale of such shares of Common Stock, Convertible Securities or Stock
Purchase Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1
above, at no time shall the Exercise Price per share of Common Stock
exceed the amount set forth in the first paragraph of the preamble of
this Warrant.
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock
to be less than the Exercise Price that would result from such
transaction.
(g) Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is
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<PAGE> 30
exercisable or the Exercise Price shall be adjusted pursuant to this
Section 4, the Company shall forthwith prepare a certificate to be
executed by the President or chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated, specifying the
number of shares of Common Stock for which this Warrant is exercisable
and (if such adjustment was made pursuant to Section 4.5) describing the
number and kind of any other shares of stock or Other Property for which
this Warrant is exercisable, and any related change in the Exercise
Price, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to
each Holder in accordance with Section 15.2. The Company shall keep at
its principal office or at the Designated Office, if different, copies of
all such certificates and cause the same to be available for inspection
at said office during normal business hours by any Holder or any
prospective transferee of a Warrant designated by a Holder thereof.
(h) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an
event occurs that requires the application of more than one
subsection, all applicable subsections shall be given independent
effect without duplication.
5. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
reasonably appropriate to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company shall take all
such action as may be
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<PAGE> 31
necessary or reasonably appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all Liens, and shall use all
commercially reasonably efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or (b) any
amendment of the Certificate of Incorporation of the Company, the Company shall
mail to each Holder of a Warrant in accordance with the provisions of Section
14.2 hereof a notice specifying the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer or disposition is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition,
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and a description in reasonable detail of the transaction. Such notice shall
be mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall
the Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in
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<PAGE> 33
Section 8.2(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 8.2(b), unless the Holder delivers to
the Company an Opinion of Counsel to the effect that such legend is not
required for the purposes of compliance with the Securities Act. Holders of
the Warrants or the Restricted Common Stock, as the case may be, shall not be
entitled to Transfer such Warrants or such Restricted Common Stock except in
accordance with this Section 8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS
(A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
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<PAGE> 34
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Not withstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company, at the expense of the Company, a new Warrant
bearing the following legend in place of the restrictive legend set forth
hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed
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<PAGE> 35
thereon. Wherever the restrictions imposed by this Section shall terminate as
to any share of Restricted Common Stock, as hereinabove provided, the
Holder thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series A Warrants and the
holders of Warrant Stock (as defined in Section 9.1(b)) are collectively
referred to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series A Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with
respect to such Common Stock being removed in connection with such
transaction,(ii) any other securities issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or
in exchange by the Company generally for, or in replacement by the
Company generally of, any shares of Warrant Stock and (iii) any
securities issued in exchange for any such Warrant Stock in any merger or
reorganization of the Company, but in the cases of clauses (ii) and (iii)
only so long as such securities have not been registered and Transferred
pursuant to the Securities Act or Transferred in a transaction exempt
from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect to such securities are
removed in connection with such Transfer.
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(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series A Warrants held
by such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total
number of shares of Warrant Stock Outstanding as of such date plus (ii)
the number of shares of Warrant Stock issuable upon exercise of all
outstanding Warrants and Series A Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series A
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives at any
time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares
of Warrant Stock then outstanding (the "Demanding Holders") that the Company
file a registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for an offering on a delayed or continual basis pursuant to Rule 415
under the Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration,
the Company shall:
(1) File the requested registration statement with the
Commission as promptly as practicable, and shall use all commercially
reasonable efforts to have the registration declared effective under the
Securities Act as soon as reasonably practicable, in each instance giving
due
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regard to the need to prepare and file current financial statements,
conduct due diligence and complete other actions that are reasonably
necessary to effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand
Registration, for up to 90 days or until such earlier date as of which
all Registrable Securities covered by such registration statement shall
have been disposed of in the manner described in the registration
statement, and (y) if a Shelf Registration, for 270 days.
Notwithstanding the foregoing, if for any reason the effectiveness of a
Demand Registration is suspended or postponed as permitted by Subsection
(d) below, the foregoing period shall be extended by the aggregate number
of days of such suspension or postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than by reason of a failure on the part of the Selling Holders. If the Company
shall have complied with its obligations under this Section 9, a right to
demand a registration pursuant to this Section 9.2 shall be deemed to have been
satisfied (i) if a Demand Registration other than a Shelf Registration, upon
the earlier of (x) the date as of which all of the Registrable Securities
included therein shall have been disposed of pursuant to the registration
statement and (y) the date as of which such Demand Registration shall have been
Continuously Effective for a period of 90 days, and (ii) if a Shelf
Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order,
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or proceedings for such an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an
agented offering, the Majority Selling Holders shall have the right to select
the underwriter or underwriters and manager or managers to administer such
underwritten offering or the placement agent or agents for such agented
offering from among the entities listed in Schedule B hereto (or any successors
of any such entities), it being understood that the Majority Selling Holders
shall use commercially reasonable efforts to select one or more of the first
three listed entities subject to arriving at reasonably acceptable terms and
conditions for the offering.
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(f) The Company may elect to include shares of Common Stock to be sold for
its account in any such Demand Registration (including a Shelf Registration);
provided, however, if the managing underwriter shall advise the Demanding
Holders in writing (with a copy to the Company) that, in its opinion, the
number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the
price to be realized therefor, or the timing thereof, then the number of shares
proposed to be included in such Demand Registration by the Company shall be
reduced, to such number that the Demanding Holders are advised can be sold
without such effect in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders of the Company other than the WS Holders) equity securities under
the Securities Act in connection with the public offering solely for cash on
Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall
promptly give each WS Holder written notice of such registration (a "Piggyback
Registration"). Upon the written request of each WS Holder given within 20
days following the date of such notice, the Company shall cause to be included
in such registration statement and use its best efforts to be registered under
the Securities Act all the Registrable Securities that each such WS Holder
shall have requested to be registered. The Company shall have the absolute
right to withdraw or cease to prepare or file any registration statement for
any offering referred to in this Section 9.3 without any obligation or
liability to any WS Holder.
(b) If the managing underwriter shall advise the Company in writing (with
a copy to each Selling Holder) that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, or the timing thereof, then the Company will
include in such registration, to the extent of the amount and class which the
Company is so advised can be sold without such material adverse effect in such
offering: first, all securities proposed to be sold by the Company for its own
account; and second, the Warrant Stock requested to be included in such
registration by WS Holders and all other securities requested to be included in
such registration by Persons other than the Company and WS Holders, the
securities covered by this clause
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second to be included pro rata based on the estimated gross proceeds from the
sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable Securities
included in an unlimited number of Piggyback Registrations pursuant to this
Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement
with respect to such Warrant Stock and use the Company's best efforts to
cause such registration statement to become effective; provided, however,
that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated
by reference after the initial filing of the registration statement and
prior to effectiveness thereof, the Company shall furnish to one firm of
counsel for the Selling Holders (selected by Majority Selling Holders)
copies of all such documents in the form substantially as proposed to be
filed with the Commission at least four Business Days prior to filing for
review and comment by such counsel, which opportunity to comment shall
include an absolute right to control or contest disclosure if the
applicable Selling Holder reasonably believes that it may be subject to
controlling person liability under applicable securities laws with
respect thereto.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with
respect to the disposition of all securities covered by such registration
statement. If is for an underwritten offering, the
Company shall amend the registration
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statement or supplement the prospectus whenever required by the terms of
the underwriting agreement entered into pursuant to Section 9.4(e).
Subject to Rule 415 under the Securities Act, if the registration
statement is a Shelf Registration, the Company shall amend the
registration statement or supplement the prospectus so that it will
remain current and in compliance with the requirements of the Securities
Act for 270 days or after its effective date, and if during such period
any event or development occurs as a result of which the registration
statement or prospectus contains a misstatement 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, the Company shall promptly
notify each Selling Holder, amend the registration statement or
supplement the prospectus so that each will thereafter comply with the
Securities Act and furnish to each Selling Holder of Registrable
Securities such amended or supplemented prospectus, which each such
Holder shall thereafter use in the Transfer of Warrant Stock covered by
such registration statement. Pending such amendment or supplement each
such Selling Holder shall cease making offers or Transfers of
Registerable Securities pursuant to the prior prospectus. In the event
that any Registrable Securities included in a registration statement
subject to, or required by, this Warrant remain unsold at the end of the
period during which the Company is obligated to use its best efforts to
maintain the effectiveness of such registration statement, the Company
may file a post- effective amendment to the registration statement for
the purpose of removing such Registrable Securities from registered
status.
(c) Furnish to each Selling Holder of Registrable Securities,
without charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each preliminary prospectus and any amendments or supplements
thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents
as any such Selling Holder may reasonably request in order to facilitate
the disposition of Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states or jurisdictions as
shall be reasonably requested by the managing underwriter (as applicable,
or if inapplicable, the Majority Selling
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Holders), and (ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the
offer and transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment; provided, however, that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not
be required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(g) Make generally available to the Company's security holders
copies of all periodic reports, proxy statements, and other information
referred to in Section 9.9(a) and an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later than 90 days
following the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of each registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of
such Selling Holder and underwriter
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(but not more than one firm of counsel to such Selling Holders), all
financial and other information as shall be reasonably requested by them,
and provide the Selling Holder, any underwriter participating in such
offering and the representatives of such Selling Holder and underwriter
the opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have
certified the audited financial statements included in such registration
statement, in each case all as necessary to enable them to exercise their
due diligence responsibility under the Securities Act; provided, however,
that information that the Company determines, in good faith, to be
confidential and which the Company advises such Person in writing, is
confidential shall not be disclosed unless such Person signs a
confidentiality agreement reasonably satisfactory to the Company or the
related Selling Holder of Registrable Securities agrees to be responsible
for such Person's breach of confidentiality on terms reasonably
satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of
the type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company
shall furnish to each Selling Holder a signed counterpart of any such
comfort letter or legal opinion. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written
representations or acknowledgments as are customarily provided by selling
shareholders who receive such comfort letters or opinions.
(j) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a
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recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered
with or approved by such other United States or state governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company to enable the Selling Holders of Registrable
Securities to consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number
for the Common Stock prior to the effective date of the first
registration statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 9
with respect to the Registrable Securities of any Selling Holder that such
Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Selling Holder's Registrable Securities,
and to cooperate with the Company in preparing such registration; and
(ii) Agree to sell their Registrable Securities to the underwriters
at the same price and on substantially the same terms and conditions as
the Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and to
execute the underwriting agreement agreed to by the Majority Selling
Holders (in the case of a registration under Section 9.2) or the Company
and the Majority Selling Holders (in the case of a registration under
Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of
such Selling Holder's shares registered for sale pursuant to this Section
9; provided, however, it is
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understood that any failure so to notify the Company shall not be
deemed a default hereunder or to subject any Selling Holder to any claim
for damages or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of
one firm of counsel for the Selling Holders of Registrable Securities
(the "Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense), unless WS
Holders whose Registrable Securities constitutes a majority of the
Registrable Securities then outstanding agree that such withdrawn
registration shall constitute the exercise of their one demand
registration under Section 9.2 hereof. The counsel for the Selling
Holders shall be selected by Demanding Holders owning a majority of the
Registrable Securities owned by Demanding Holders to be included in a
Demand Registration and, in the case of a Piggyback Registration, by
Selling Holders owning a majority of the Registrable Securities to be
included in such registration; provided that in the case of a Piggyback
Registration, the Selling Holders shall use one firm of counsel to
represent all such holders and shall endeavor in
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good faith, with any other holders of securities to be included in
such registration, to select one firm of counsel to represent all such
selling securities holders.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to
Section 9.3 for each Selling Holder, but excluding underwriting discounts
and commissions relating to Registrable Securities (which shall be paid
on a pro rata basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act,
and each officer, director, partner, and employee of such Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may become
subject under the Securities Act, the Exchange Act or other federal or
state laws, insofar as such losses, claims, damages, liabilities and
expenses arise out of or are based upon any of the following statements,
omissions or violations pursuant to a final non-appealable order
(collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein,
or any amendments or supplements thereto;
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(ii) 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; or
(iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any applicable state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any applicable state securities
law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or expense to the extent that
it is determined by a court of competent jurisdiction
by a final non-appealable order to have solely arisen out of or be based
upon a Violation which occurred in reliance upon and in conformity with
written information furnished to the Company by the indemnified party
expressly for use in connection with such registration; provided,
further, that the indemnity agreement contained in this Section 9.7(a)
shall not apply to any underwriter to the extent that any such loss is
based on or arises out of an untrue statement or alleged untrue statement
of a material fact, or an omission or alleged omission to state a
material fact, contained in or omitted from any preliminary prospectus if
the final prospectus shall correct such untrue statement or alleged
untrue statement, or such omission or alleged omission, and a copy of the
final prospectus has not been sent or given to such person at or prior to
the confirmation of sale to such person if such underwriter was under an
obligation to deliver such final prospectus and failed to do so. The
Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in
the distribution, their officers, directors, agents and employees and
each person who controls such persons (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the
Selling Holders.
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(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors,
each of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling
Holder, any controlling Person of any such other Selling Holder and each
officer, director, partner, and employee of such other Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses are determined by a court of competent
jurisdiction by a final non-appealable order to have solely arisen out of
or be based upon a Violation that occurred in reliance upon and in
conformity with written information furnished by such Selling Holder
expressly for use in connection with such registration; provided,
however, that (x) the indemnification required by this Section 9.7(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which
consent shall not be unreasonably withheld, and (y) in no event shall the
amount of any indemnity under this Section 9.7(b) exceed the net proceeds
from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9.7 of notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing for which
such indemnified party may make a claim under this Section 9.7, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the
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right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of
any such action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified
party under this Section 9.7 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 9.7. Any reasonable fees and expenses incurred
by the indemnified party (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within
thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such
indemnified party shall have the right to employ separate counsel in any
such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying party shall have
failed to promptly assume the defense of such
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action, claim or proceeding or (iii) the named parties to any such
action, claim or proceeding (including any impleaded parties) include
both such indemnified party and the indemnifying party, and such
indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the
assertion of such defenses would create a conflict of interest such that
counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies
the indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection with any
one such action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the
reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred
to in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party
and indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether
any Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such
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Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the
limitations set forth in Section 9.7(a) and Section 9.7(b), any
reasonable legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault
of such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred. In the event that it shall be
subsequently determined that the recipient of any such periodic payment
shall not be entitled to indemnification hereunder, such recipient
promptly shall repay such payments, together with interest thereon at the
Agreed Rate from the date of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the
completion of any offering of Registrable Securities pursuant to a
registration statement under this Section 9, and otherwise.
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9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to
have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities
or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or
agented registration), during the 5-day period prior to, and during the 45-day
period beginning on, the date such registration statement is declared effective
under the Securities Act by the Commission, provided that such WS Holder is
timely notified of such effective date in writing by the Company or such
managing underwriter.
9.9. Additional Covenants of the Company. The Company hereby agrees and
covenants as follows:
(a) The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If
the Company is not required to file reports pursuant to the Exchange Act,
upon the request of any WS Holder, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of
the Securities Act, and take such further action as may be reasonably
required from time to time and as may be within the reasonable control of
the Company, to enable the WS Holders to Transfer Warrants or Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities
Act or any similar rule or regulation hereafter adopted by the
Commission. In addition, promptly upon the request of any WS Holder, the
Company shall provide such WS Holder with such publicly available
financial statements, reports and other information as may be required to
permit such WS Holder to Transfer shares of Registrable Securities to
Qualified Institutional Investors pursuant to Rule 144A of the Securities
Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Stock Purchase Rights during the 5 Business Days prior to, and during the
90-day period beginning on,
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the commencement of a public distribution of Registrable Securities
pursuant to any registration statement prepared pursuant to this Section
9 (other than by the Company pursuant to such registration if the
registration is pursuant to Section 9.3 or by the Company pursuant to any
dividend reinvestment plan offered by it to its stockholders). The
Company shall not effect any registration of its securities (other
than on Form S-4, Form S-8, or any successor forms to such forms or
pursuant to such other registration rights agreements as may be approved
in writing by the Majority Selling Holders) or effect any public or
private sale or distribution of any of its securities, including a sale
pursuant to Regulation D under the Securities Act, whether on its own
behalf or at the request of any holder or holders of such securities from
the date of a request for a Demand Registration pursuant to Section 9.2
until 90 days following the effective date of such Demand Registration
statement, unless the Company shall have previously notified in writing
all Selling Holders of the Company's desire to do so, and the Majority
Selling Holders or the managing underwriter, if any, shall have consented
thereto in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant
to which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or
other agreement) shall contain a provision whereby any holder receiving
such Common Stock who will hold more than one percent (1%) of the amount
of such Common Stock then outstanding shall agree not to effect any
public sale or distribution of any such Common Stock during the periods
described in the second sentence of Section 9.9(b), in each case
including a sale pursuant to Rule 144 under the Securities Act (unless
such Person is prevented by applicable statute or regulation from
entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer
or agree to Transfer all or substantially all the Company's assets,
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unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively,
shall have agreed in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which
the WS Holders would be entitled to receive in exchange for Registrable
Securities pursuant to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of Caisse Nationale de Credit Agricole shall be a sufficient indemnity)
and, in case of mutilation, upon surrender and cancellation hereof, the Company
will execute and deliver in lieu hereof a new Warrant of like tenor to such
Holder; provided, however, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
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12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular and
periodic reports, proxy statements (other than preliminary) and
registration statements (other than registration statements on Forms S-3
(relating to debt securities) and S-8) which the Company may file with
the Securities and Exchange Commission or any governmental agency
substituted therefor.
(ii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
or made available by the Company to the holders of any class of
its securities generally or by any Subsidiary of the Company to
the holders of any class of its securities generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice (the
"Call Notice") to the Holders of all outstanding Warrants given at any time on
or after the date of the occurrence of the Triggering Event and before August
31, 1997, to repurchase on the date specified in the notice from each Holder of
a Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series B Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series B Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender
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of this Warrant at the Designated Office against payment of the repurchase
price therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
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limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss,
cost, damage, reasonable attorneys' and accountants' fees and expenses, court
costs and all other out-of-pocket expenses incurred in connection with or
arising from a Company Default. This indemnification provision shall be in
addition to the rights of such Holder or Holders to bring an action against the
Company for breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provi sions of Sections
3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and, in the case of Section 9, all Holders of shares of Warrant
Stock issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
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14.7. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such
Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the written consent of the Holder thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS
SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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<PAGE> 59
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 61
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.8
SERIES B WARRANT
to Purchase Common Stock of
NORAND CORPORATION
Warrant No. B - 3
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 13
3.1. Transfer 13
3.2. Division and Combination. 14
3.3. Expenses. 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS14 14
4.1. Stock Dividends, Subdivisions and Combinations 15
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and Convertible Securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under this Section 20
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions. 23
7.2 Closing of Transfer Books. 23
8. TRANSFER RESTRICTIONS23
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures. 30
9.5. Selling Holders' Obligations. 34
9.6. Expenses of Registration. 34
9.7. Indemnification; Contribution. 35
9.8. Holdback. 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver. 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability. 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment. 45
14.8. Severability 45
14.9. Headings. 45
14.10. GOVERNING LAW; JURISDICTION. 45
ANNEX A SUBSCRIPTION FORM 48
ANNEX B ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
-ii-
<PAGE> 4
SCHEDULE B UNDERWRITERS AND AGENTS
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<PAGE> 5
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS
MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED
SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S)
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER.
Warrant No. B - 3
SERIES B WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT FLEET NATIONAL BANK, or registered assigns, is
entitled, at any time after August 31, 1997 and prior to the Expiration Date
(such term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from NORAND CORPORATION, a Delaware corporation (the
"Company"), Fifty-Two Thousand Two Hundred Sixty-five (52,265) shares of the
Common Stock of the Company (subject to adjustment as provided herein), at a
purchase price of $21.15 per share (the initial "Exercise Price", subject to
adjustment as provided herein), all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
<PAGE> 6
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings
set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any
class of voting stock of such Person and has the power to vote such
shares or (c) more than ten percent of the outstanding shares of any
class of voting stock (or, in the case of a Person which is not a
corporation, more than ten percent of the equity interest) of which is
beneficially owned or held by such Person and such Person has the power
to vote such shares or equity interest. The term "control" as used with
respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate
base rate of interest announced by The First National Bank of Chicago
from time to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined
by an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and
conditions for the
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<PAGE> 7
appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such
determination of Appraised Value shall be final and binding on the
Company and all affected holders of Warrants or Warrant Stock. Such
Appraised Value shall be determined as a pro rata portion of the value of
the Company taken as a whole, based on the higher of (A) the value
derived from a hypothetical sale of the entire Company as a going concern
by a willing seller to a willing buyer (neither acting under any
compulsion) and (B) the liquidation value of the entire Company. No
discount shall be applied on account of (i) any Warrants or Warrant Stock
representing a minority interest, (ii) any lack of liquidity of the
Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant
Stock may constitute "restricted securities" for securities law purposes
or (iv) the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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<PAGE> 8
class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation
(as defined in Section 4.5 hereof) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated
by Section 4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the
Company to comply in any material respect with any covenant of the
Company contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and
available for Transfers of Warrant Stock thereunder for the longer of
either (i) any ten consecutive Business Days, or (ii) an aggregate of
fifteen Business Days during the period specified in the relevant
provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or
exchangeable for, with or without payment of additional consideration in
cash or property, shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the
Lenders party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for
the shorter of (x) the twenty consecutive Business Days immediately
preceding such date or (y) the period commencing on the Business Day next
following the first public announcement of any event giving rise to an
adjustment of the Exercise Price pursuant to Section 4 below
-4-
<PAGE> 9
and ending on such date. The "daily market price" for each such
Business Day shall be: (i) if the Common Stock is then listed on a
national securities exchange or is listed on NASDAQ and is
designated as a National Market System security, the last sale price,
regular way, on such day on the principal stock exchange or market system
on which such Common Stock is then listed or admitted to trading, or, if
no such sale takes place on such day, the average of the closing bid and
asked prices for the Common Stock on such day as reported on such stock
exchange or market system or (ii) if the Common Stock is not then listed
or admitted to trading on any national securities exchange or designated
as a National Market System security on NASDAQ but is traded
over-the-counter, the average of the closing bid and asked prices for the
Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in
the National Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section
9.2(a) hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms
of which equity capital are acceptable to the Majority Warrant Holders)
raised by and/or contributed to the Company subsequent to the Original
Issue Date or new Indebtedness (as defined in the Credit Agreement)
subordinated to the Obligations (as defined in the Credit Agreement),
provided the terms of such Indebtedness (including, without limitation,
maturity, amortization, covenants, defaults, remedies and subordination
provisions) are acceptable to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time
to time.
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"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to
Section 4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under
the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date
shall mean (A) if the Common Stock is publicly traded on such date, the
Current Market Price per share or (B) if the Common Stock is not publicly
traded on such date, (1) the fair market value per share of Common Stock
as determined in good faith by the Board of Directors of the Company and
set forth in a written notice to each Holder or (2) if the Majority
Warrant Holders object in writing to such price as determined by the
Board of Directors within thirty days after receiving notice of same, the
Appraised Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to
be determined, all shares of Common Stock Outstanding on such date and
all shares of Common Stock issuable in respect of (x) the Warrants
outstanding on such date, (y) any Convertible Securities outstanding on
such date and (z) any other Stock Purchase Rights outstanding on such
date, in each case regardless of whether or not the conversion, exchange,
subscription or purchase rights associated with such Convertible
Securities or Stock Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or
entailing a finding, that the Company is insolvent or bankrupt, or
seeking reorganization, liquidation, dissolution, winding-up, charter
revocation or other similar relief with respect to the Company or any of
its properties, assets or debts, or seeking the appointment of a
receiver, trustee, custodian, liquidator, sequestrator or similar
official for the Company or any of its properties or assets, or the
Company becoming insolvent or bankrupt or generally unable to pay its
debts as they become due, or the Company voluntarily suspending its
business or making a general assignment for the benefit of creditors;
provided that an Insolvency Event shall not be deemed to have occurred on
account of any such proceeding which is involuntary on the part of the
Company unless same shall not have been dismissed or stayed within 60
days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement perfecting a security interest under the
Uniform Commercial Code or comparable law of any jurisdiction).
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"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock
(with any such Warrants being deemed to represent, for the purposes of
such calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced
in Securities Act or bank regulatory matters, as the case may be, chosen
by the Holder of this Warrant or Warrant Stock issued upon the exercise
hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary thereof, and shall
include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Outstanding", when used with respect to Warrant Stock for the purposes
of Section 9 hereof shall have the meaning set forth in Section 9.1(d)
hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth
in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Holders" shall mean, with respect to a specified
registration under Section 9 hereof, WS Holders whose Registrable
Securities are included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with this
Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with,
and having the same terms (other than the number of shares purchasable
upon the exercise thereof) as, this Warrant.
"Settlement Stock" shall mean the shares of Common Stock
contemplated to be issued in settlement of the pending shareholders'
claims against the Company with respect to the litigation styled In re
Norand Corporation Securities Litigation, Master File No. C95-323,
pending in the United States District Court for the Northern District of
Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in Section
2.1(c) hereof.
"Shelf Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after
the Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the
Warrants and any issuance of Common Stock, Convertible Securities
or Stock Purchase Rights (and
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<PAGE> 15
any issuance of Common Stock pursuant to the conversion,
exchange or exercise of any such Convertible Securities or Stock
Purchase Rights) deemed to have been issued as of the Original
Issue Date pursuant to the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant
(other than warrants granted to Jay Alix and Associates and to
Donald W. Rowley for up to the respective number of shares set
forth on Schedule A) granted or issued after the Original Issue
Date shall not be less than the "daily market price" (as that term
is defined in the definition of Current Market Price) of the Common
Stock on the date of grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights with respect to which the
Majority Warrant Holders shall have waived application of the
provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or
more Subsidiaries, or any other business entity in which the Company or
one or more Subsidiaries or the Company and one or more Subsidiaries own
more than a 50% interest either in the profits or capital of such
business entity or (b) whose net earnings, or portions thereof, are
consolidated with the net earnings of the Company and are recorded on the
books of the Company for financial reporting purposes in accordance with
GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a
"sale" thereof within the meaning of the Securities Act.
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"Triggering Event" shall mean either the repayment in full of all
indebtedness under the Credit Agreement or the receipt by the Company of
at least $20 million in net cash proceeds from additional Equity.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as
of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise
of Warrants until such time as such shares of Common Stock have either
been (i) Transferred in a public offering pursuant to a registration
statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof with all
transfer restrictions and restrictive legends with respect to such
Common Stock being removed in connection with such transaction. "Warrant
Stock", for the purposes of Section 9 hereof, shall have the meaning set
forth in Section 9.1(b) hereof.
"WS Holder" shall have the meaning set forth in Section 9.1(a)
hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after August 31, 1997 and until
5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may
from time to time exercise
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this Warrant, on any Business Day, for all or any part of the number of
shares of Common Stock purchasable hereunder (as determined pursuant to Section
2.2 below). In order to exercise this Warrant, in whole or in part, the Holder
shall (i) deliver to the Company at the Designated Office a written notice of
the Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of Common
Stock to be purchased, together with this Warrant and (ii) pay to the Company
the Warrant Price (the date on which both such delivery and payment shall have
first taken place being hereinafter sometimes referred to as the "Exercise
Date"). Such Exercise Notice shall be in the form of the subscription form
appearing at the end of this Warrant as Annex A, duly executed by the Holder or
its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current
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<PAGE> 18
Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly
endorsed by or accompanied by appropriate instruments of transfer duly
executed by the Holder or by the Holder's attorney duly authorized in writing.
In the event of any withholding of Warrant Stock or surrender of Common Stock
pursuant to clause (ii) or (iii) above where the number of shares whose Current
Market Price is equal to the Warrant Price is not a whole number, the number of
shares withheld by or surrendered to the Company shall be rounded up to the
nearest whole share and the Company shall make a cash payment to the Holder
based on the incremental fraction of a share being so withheld by or
surrendered to the Company in an amount determined in accordance with Section
2.3 hereof. For the purpose of making payment of the Warrant Price, any Note
surrendered to the Company shall be deemed to have a value equal to 100% of the
principal amount thereof plus any interest accrued but unpaid thereon. If the
Holder delivers a Note with a deemed value that exceeds the Warrant Price, the
Company shall reissue to the Holder a new Note identical in all respects to the
surrendered Note except that the principal amount of such new Note shall be
equal to the principal amount that, together with any interest accrued but
unpaid thereon, is equal to the deemed value of the surrendered Note less the
Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, issued without violation of any
preemptive rights and free and clear of all Liens (other than any created by
actions of the Holder). The Company shall pay all expenses in connection with,
and all taxes and other governmental charges that may be imposed with respect
to, the issue or delivery thereof, unless such tax or charge is imposed by law
upon the Holder, in which case such taxes or charges shall be paid by the
Holder and the Company shall reimburse the Holder therefor on an After-Tax
Basis.
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2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything
in this Warrant to the contrary, the Holder of this Warrant, if subject to the
Bank Holding Company Act or any provision of the Glass-Steagall Act, may
exercise this Warrant only if the Notice of Exercise is accompanied by an
Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such
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clearances would be obtained or make it likely that such clearances would, if
obtained, contain material conditions adverse to such Holder. In the event
that federal or state regulatory clearances are required prior to the exercise
of this Warrant by the Holder hereof, the Company shall reasonably cooperate
with such Holder in providing such information to any regulatory agency as such
agency may reasonably require. In the event any such regulatory clearance is
withheld or denied, such Holder may continue to hold this Warrant until its
expiration or may sell or otherwise transfer this Warrant in accordance with
the terms hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to compliance with the applicable
provisions of this Warrant, this Warrant may be divided or combined with other
Warrants upon presentation hereof at the Designated Office, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with the applicable provisions of this Warrant as to any transfer
which may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
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3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense any new Warrant or Warrants required to be issued under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to
the number of shares of Common Stock Outstanding immediately after such
adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If at any time
the Company shall issue or sell any shares of Common Stock in a Subsequent
Issuance for a consideration per share that is less than the Exercise Price in
effect immediately prior to such issuance or sale, then, forthwith upon such
issuance or sale, the Exercise Price shall be reduced to a price calculated by
dividing (1) an amount equal to the sum of (x) the
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number of shares of Common Stock Outstanding immediately prior to such
Subsequent Issuance multiplied by the then existing Exercise Price, plus (y)
the aggregate consideration (determined in accordance with the provisions of
Section 4.6 hereof), if any, received by the Company in connection with such
Subsequent Issuance, by (2) the total number of shares of Common Stock
Outstanding immediately after such Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a)
In the event that the Company shall at any time issue, sell or grant any Stock
Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose
of Section 4.2 above, the Company shall be deemed to have issued at that time a
number of shares of Common Stock equal to the maximum number of shares of
Common Stock (without giving effect to any antidilution provisions in such
Stock Purchase Rights) that are or may become issuable upon exercise of such
Stock Purchase Rights (or upon exercise of any Convertible Securities issuable
upon exercise of such Stock Purchase Rights) for a consideration per share
equal to (i) the aggregate consideration per share (determined in accordance
with the provisions of Section 4.6 hereof) received by the Company in
connection with the issuance, sale or grant of such Stock Purchase Rights plus
(ii) the minimum amount of such consideration per share receivable by the
Company in connection with the exercise of such Stock Purchase Rights (and the
exercise of any Convertible Securities issuable upon exercise of such Stock
Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such
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<PAGE> 23
Convertible Securities for a consideration per share equal to (i) the aggregate
consideration per share (determined in accordance with the provisions of
Section 4.6 hereof) received by the Company in connection with the issuance or
sale of such Convertible Securities plus (ii) the minimum amount of such
consideration per share receivable by the Company in connection with the
exercise of such conversion or exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or
the rights of conversion or exchange associated with such Convertible
Securities shall expire by their terms or any of such Stock Purchase Rights or
Convertible Securities shall be repurchased by the Company or a Subsidiary
thereof for a consideration per underlying share of Common Stock not exceeding
the amount of such consideration received by the Company in connection with the
issuance, sale or grant of such Stock Purchase Rights or Convertible
Securities, the Exercise Price then in effect shall forthwith be increased to
the Exercise Price that would have been in effect if such expiring Stock
Purchase Rights or rights of conversion or exchange or such repurchased Stock
Purchase Rights
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or Convertible Securities had never been issued. Similarly, if at any time
after any such adjustment of the Exercise Price shall have been made pursuant
to Section 4.2 (i) any additional consideration is received or becomes
receivable by the Company in connection with the issuance or exercise of such
Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in
the conversion ratio applicable to such Convertible Securities so that fewer
shares of Common Stock will be issuable upon the conversion or exchange thereof
or there is a decrease in the number of shares of Common Stock issuable upon
exercise of such Stock Purchase Rights, the Exercise Price then in effect shall
be forthwith readjusted to the Exercise Price that would have been in effect
had such changes taken place at the time that such Stock Purchase Rights or
Convertible Securities were initially issued, granted or sold. In no event
shall any readjustment under this Section 4.3(d) affect the validity of any
shares of Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of
the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
4.5. Reorganization, Reclassification, Merger, Con solidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or
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disposition of assets, (i) shares of common stock of the successor or acquiring
corporation or of the Company (if it is the surviving corporation) or (ii)
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Holder of this Warrant shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In such event, the
aggregate Exercise Price otherwise payable for the shares of Common Stock
issuable upon exercise of this Warrant shall be allocated among the shares of
common stock and Other Property receivable as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be reasonably deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of any shares of the common stock
of such successor or acquiring corporation for which this Warrant thus becomes
exercisable, which modifications shall be as equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.5,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation and that is not subject to
redemption and shall also include any evidences of indebtedness, shares of
stock or other securities that are convertible into or exchangeable for any
such
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stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 4.5
shall similarly apply to successive reorganizations, reclassifications,
mergers, consolidations or disposition of assets.
4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3
and 4.4 hereof, the consideration received and/or receivable by the Company in
connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any accrued interest or
dividends, expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company.
(2) Securities or Other Property. In the case of securities
or other property, the fair market value thereof as of the date
immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares
of Common Stock are issued or sold together with other securities
or other assets of the Company for a consideration which covers
both, the consideration received (computed as provided in (1) and
(2) above) shall be allocable to such shares of Common Stock as
determined in good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or
Convertible Securities shall be issued or sold together with other
securities or other assets of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to the Stock
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Purchase Rights or Convertible Securities, the consideration
allocable to such Stock Purchase Rights or Convertible Securities shall
be determined in good faith by the Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or
Convertible Securities, such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or
sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights or Convertible Securities
shall be issued in connection with any merger or consolidation in
which the Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value on the date
of issuance of such security of such portion of the assets and business
of the non-surviving corporation attributable to such Common Stock, Stock
Purchase Rights or Convertible Securities, as is determined in good faith
by the Company's Board of Directors.
(7) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good faith
by the Majority Warrant Holders, and any dispute shall be resolved
by an investment banking or appraisal firm of recognized national
standing selected by the Company and reasonably acceptable to the
Majority Warrant Holders and whose decision shall be binding on
the Company and all holders of Warrants. The fees and expenses of
such firm shall be paid by the party or parties whose position is
not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to
which the other provisions of this Section 4 are not strictly applicable but
as to which the failure to make any adjustment would not fairly protect the
purchase rights repre-
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sented by this Warrant in accordance with the essential intent and principles
hereof (including, without limitation, the issuance of securities other than
Common Stock which have the right to participate in distributions to the
holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank
selected by the Majority Warrant Holders), and the decision of the investment
bank making such determination shall be final and binding on the Company and
all affected holders of Warrants or Warrant Stock. Promptly after receipt of
the opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
4.8. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
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(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase
Rights, then all references in this Section 4 to the date of the issuance
or sale of such shares of Common Stock, Convertible Securities or Stock
Purchase Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1
above, at no time shall the Exercise Price per share of Common Stock
exceed the amount set forth in the first paragraph of the preamble of
this Warrant.
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock
to be less than the Exercise Price that would result from such
transaction.
(g) Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is
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exercisable or the Exercise Price shall be adjusted pursuant to this
Section 4, the Company shall forthwith prepare a certificate to be
executed by the President or chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated, specifying the
number of shares of Common Stock for which this Warrant is exercisable
and (if such adjustment was made pursuant to Section 4.5) describing the
number and kind of any other shares of stock or Other Property for which
this Warrant is exercisable, and any related change in the Exercise
Price, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to
each Holder in accordance with Section 15.2. The Company shall keep at
its principal office or at the Designated Office, if different, copies of
all such certificates and cause the same to be available for inspection
at said office during normal business hours by any Holder or any
prospective transferee of a Warrant designated by a Holder thereof.
(h) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an
event occurs that requires the application of more than one
subsection, all applicable subsections shall be given independent
effect without duplication.
5. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be
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necessary or reasonably appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the
Company shall take all such action as may be necessary or reasonably
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant,
free and clear of all Liens, and shall use all commercially reasonably efforts
to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or (b) any
amendment of the Certificate of Incorporation of the Company, the Company shall
mail to each Holder of a Warrant in accordance with the provisions of Section
14.2 hereof a notice specifying the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer or disposition is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition,
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and a description in reasonable detail of the transaction. Such notice shall
be mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in
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Section 8.2(b), unless the Holder delivers to the Company an Opinion
of Counsel to the effect that such legend is not required for the purposes of
compliance with the Securities Act. Holders of the Warrants or the Restricted
Common Stock, as the case may be, shall not be entitled to Transfer such
Warrants or such Restricted Common Stock except in accordance with this Section
8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS
(A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
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<PAGE> 34
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Not withstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company, at the expense of the Company, a new Warrant
bearing the following legend in place of the restrictive legend set forth
hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed
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thereon. Wherever the restrictions imposed by this Section shall terminate
as to any share of Restricted Common Stock, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series A Warrants and the
holders of Warrant Stock (as defined in Section 9.1(b)) are collectively
referred to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series A Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with
respect to such Common Stock being removed in connection with such
transaction,(ii) any other securities issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or
in exchange by the Company generally for, or in replacement by the
Company generally of, any shares of Warrant Stock and (iii) any
securities issued in exchange for any such Warrant Stock in any merger or
reorganization of the Company, but in the cases of clauses (ii) and (iii)
only so long as such securities have not been registered and Transferred
pursuant to the Securities Act or Transferred in a transaction exempt
from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect to such securities are
removed in connection with such Transfer.
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<PAGE> 36
(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series A Warrants held
by such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total
number of shares of Warrant Stock Outstanding as of such date plus (ii)
the number of shares of Warrant Stock issuable upon exercise of all
outstanding Warrants and Series A Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series A
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives at any
time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares
of Warrant Stock then outstanding (the "Demanding Holders") that the Company
file a registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for an offering on a delayed or continual basis pursuant to Rule 415
under the Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration, the
Company shall:
(1) File the requested registration statement with the Commission as
promptly as practicable, and shall use all commercially reasonable
efforts to have the registration declared effective under the Securities
Act as soon as reasonably practicable, in each instance giving due
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<PAGE> 37
regard to the need to prepare and file current financial statements,
conduct due diligence and complete other actions that are
reasonably necessary to effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand
Registration, for up to 90 days or until such earlier date as of which
all Registrable Securities covered by such registration statement shall
have been disposed of in the manner described in the registration
statement, and (y) if a Shelf Registration, for 270 days.
Notwithstanding the foregoing, if for any reason the effectiveness of a
Demand Registration is suspended or postponed as permitted by Subsection
(d) below, the foregoing period shall be extended by the aggregate number
of days of such suspension or postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than by reason of a failure on the part of the Selling Holders. If the Company
shall have complied with its obligations under this Section 9, a right to
demand a registration pursuant to this Section 9.2 shall be deemed to have been
satisfied (i) if a Demand Registration other than a Shelf Registration, upon
the earlier of (x) the date as of which all of the Registrable Securities
included therein shall have been disposed of pursuant to the registration
statement and (y) the date as of which such Demand Registration shall have been
Continuously Effective for a period of 90 days, and (ii) if a Shelf
Registration, upon the effective date of a Shelf Registration, provided
no stop order or similar order, or
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proceedings for such an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an
agented offering, the Majority Selling Holders shall have the right to select
the underwriter or underwriters and manager or managers to administer such
underwritten offering or the placement agent or agents for such agented
offering from among the entities listed in Schedule B hereto (or any successors
of any such entities), it being understood that the Majority Selling Holders
shall use commercially reasonable efforts to select one or more of the first
three listed entities subject to arriving at reasonably acceptable terms and
conditions for the offering.
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(f) The Company may elect to include shares of Common Stock to be sold for
its account in any such Demand Registration (including a Shelf Registration);
provided, however, if the managing underwriter shall advise the Demanding
Holders in writing (with a copy to the Company) that, in its opinion, the
number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be
realized therefor, or the timing thereof, then the number of shares proposed to
be included in such Demand Registration by the Company shall be reduced, to
such number that the Demanding Holders are advised can be sold without such
effect in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders of the Company other than the WS Holders) equity securities under
the Securities Act in connection with the public offering solely for cash on
Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall
promptly give each WS Holder written notice of such registration (a "Piggyback
Registration"). Upon the written request of each WS Holder given within 20
days following the date of such notice, the Company shall cause to be included
in such registration statement and use its best efforts to be registered under
the Securities Act all the Registrable Securities that each such WS Holder
shall have requested to be registered. The Company shall have the absolute
right to withdraw or cease to prepare or file any registration statement for
any offering referred to in this Section 9.3 without any obligation or
liability to any WS Holder.
(b) If the managing underwriter shall advise the Company in writing (with
a copy to each Selling Holder) that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, or the timing thereof, then the Company will
include in such registration, to the extent of the amount and class which the
Company is so advised can be sold without such material adverse effect in such
offering: first, all securities proposed to be sold by the Company for its own
account; and second, the Warrant Stock requested to be included in such
registration by WS Holders and all other securities requested to be included in
such registration by Persons other than the Company and WS Holders, the
securities covered by this clause
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second to be included pro rata based on the estimated gross proceeds from
the sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable Securities
included in an unlimited number of Piggyback Registrations pursuant to this
Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement
with respect to such Warrant Stock and use the Company's best efforts to
cause such registration statement to become effective; provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by
reference after the initial filing of the registration statement and
prior to effectiveness thereof, the Company shall furnish to one firm of
counsel for the Selling Holders (selected by Majority Selling Holders)
copies of all such documents in the form substantially as proposed to be
filed with the Commission at least four Business Days prior to filing for
review and comment by such counsel, which opportunity to comment shall
include an absolute right to control or contest disclosure if the
applicable Selling Holder reasonably believes that it may be subject to
controlling person liability under applicable securities laws with
respect thereto.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with
respect to the disposition of all securities covered by such registration
statement. If the registration is for an underwritten offering, the
Company shall amend the registration statement or supplement the
prospectus whenever required by the terms of the underwriting agreement
entered into pursuant to Section 9.4(e). Subject to Rule 415 under the
Securities Act, if the registration statement is a Shelf Registration,
the Company shall amend the registration
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statement or supplement the prospectus so that it will remain current and
in compliance with the requirements of the Securities Act for 270 days
or after its effective date, and if during such period any event or
development occurs as a result of which the registration statement or
prospectus contains a misstatement 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, the Company shall promptly notify each
Selling Holder, amend the registration statement or supplement the
prospectus so that each will thereafter comply with the Securities Act
and furnish to each Selling Holder of Registrable Securities such amended
or supplemented prospectus, which each such Holder shall thereafter use
in the Transfer of Warrant Stock covered by such registration statement.
Pending such amendment or supplement each such Selling Holder shall cease
making offers or Transfers of Registerable Securities pursuant to the
prior prospectus. In the event that any Registrable Securities included
in a registration statement subject to, or required by, this Warrant
remain unsold at the end of the period during which the Company is
obligated to use its best efforts to maintain the effectiveness of such
registration statement, the Company may file a post-effective
amendment to the registration statement for the purpose of removing
such Registrable Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities,
without charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each preliminary prospectus and any amendments or supplements
thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents
as any such Selling Holder may reasonably request in order to facilitate
the disposition of Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states or jurisdictions as
shall be reasonably requested by the managing underwriter (as applicable,
or if inapplicable, the Majority Selling
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Holders), and (ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the
offer and transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment; provided, however, that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not
be required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(g) Make generally available to the Company's security holders
copies of all periodic reports, proxy statements, and other information
referred to in Section 9.9(a) and an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later than 90 days
following the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of each registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of
such Selling Holder and underwriter
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(but not more than one firm of counsel to such Selling Holders), all
financial and other information as shall be reasonably requested
by them, and provide the Selling Holder, any underwriter participating in
such offering and the representatives of such Selling Holder and
underwriter the opportunity to discuss the business affairs of the
Company with its principal executives and independent public accountants
who have certified the audited financial statements included in such
registration statement, in each case all as necessary to enable them to
exercise their due diligence responsibility under the Securities Act;
provided, however, that information that the Company determines, in good
faith, to be confidential and which the Company advises such Person in
writing, is confidential shall not be disclosed unless such Person signs
a confidentiality agreement reasonably satisfactory to the Company or the
related Selling Holder of Registrable Securities agrees to be responsible
for such Person's breach of confidentiality on terms reasonably
satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of
the type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company
shall furnish to each Selling Holder a signed counterpart of any such
comfort letter or legal opinion. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written
representations or acknowledgments as are customarily provided by selling
shareholders who receive such comfort letters or opinions.
(j) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a
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recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be
registered with or approved by such other United States or state
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Selling Holders of
Registrable Securities to consummate the disposition of such Registrable
Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number
for the Common Stock prior to the effective date of the first
registration statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition
precedent to the obligations of the Company to take any action pursuant
to this Section 9 with respect to the Registrable Securities of any Selling
Holder that such Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Selling Holder's Registrable Securities,
and to cooperate with the Company in preparing such registration; and
(ii) Agree to sell their Registrable Securities to the underwriters
at the same price and on substantially the same terms and conditions as
the Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and to
execute the underwriting agreement agreed to by the Majority Selling
Holders (in the case of a registration under Section 9.2) or the Company
and the Majority Selling Holders (in the case of a registration under
Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of
such Selling Holder's shares registered for sale pursuant to this Section
9; provided, however, it is
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understood that any failure so to notify theCompany shall not be
deemed a default hereunder or to subject any Selling Holder to any claim
for damages or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of
one firm of counsel for the Selling Holders of Registrable Securities
(the "Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense), unless WS
Holders whose Registrable Securities constitutes a majority of the
Registrable Securities then outstanding agree that such withdrawn
registration shall constitute the exercise of their one demand
registration under Section 9.2 hereof. The counsel for the Selling
Holders shall be selected by Demanding Holders owning a majority of the
Registrable Securities owned by Demanding Holders to be included in a
Demand Registration and, in the case of a Piggyback Registration, by
Selling Holders owning a majority of the Registrable Securities to be
included in such registration; provided that in the case of a Piggyback
Registration, the Selling Holders shall use one firm of counsel to
represent all such holders and shall endeavor in
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good faith, with any other holders of securities to be included in such
registration, to select one firm of counsel to represent all such
selling securities holders.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to
Section 9.3 for each Selling Holder, but excluding underwriting discounts
and commissions relating to Registrable Securities (which shall be paid
on a pro rata basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities
are included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act,
and each officer, director, partner, and employee of such Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may become
subject under the Securities Act, the Exchange Act or other federal or
state laws, insofar as such losses, claims, damages, liabilities and
expenses arise out of or are based upon any of the following statements,
omissions or violations pursuant to a final non-appealable order
(collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein,
or any amendments or supplements thereto;
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(ii) 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; or
(iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any applicable state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any applicable state securities
law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or expense to the extent that
it is determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation which occurred in reliance upon and in conformity with written
information furnished to the Company by the indemnified party expressly
for use in connection with such registration; provided, further, that the
indemnity agreement contained in this Section 9.7(a) shall not apply to
any underwriter to the extent that any such loss is based on or arises
out of an untrue statement or alleged untrue statement of a material
fact, or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the final
prospectus shall correct such untrue statement or alleged untrue
statement, or such omission or alleged omission, and a copy of the final
prospectus has not been sent or given to such person at or prior to the
confirmation of sale to such person if such underwriter was under an
obligation to deliver such final prospectus and failed to do so. The
Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in
the distribution, their officers, directors, agents and employees and
each person who controls such persons (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the
Selling Holders.
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(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors,
each of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling
Holder, any controlling Person of any such other Selling Holder and each
officer, director, partner, and employee of such other Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses are determined by a court of competent
jurisdiction by a final non-appealable order to have solely arisen out of
or be based upon a Violation that occurred in reliance upon and in
conformity with written information furnished by such Selling Holder
expressly for use in connection with such registration; provided,
however, that (x) the indemnification required by this Section 9.7(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which
consent shall not be unreasonably withheld, and (y) in no event shall the
amount of any indemnity under this Section 9.7(b) exceed the net proceeds
from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9.7 of notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing for which
such indemnified party may make a claim under this Section 9.7, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
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right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of
any such action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified
party under this Section 9.7 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 9.7. Any reasonable fees and expenses incurred
by the indemnified party (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within
thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such
indemnified party shall have the right to employ separate counsel in any
such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying party shall have
failed to promptly assume the defense of such action, claim or proceeding
or (iii) the named parties to any such action, claim or proceeding
(including any impleaded parties) include both such indemnified party and
the indemnifying party, and such indemnified party shall have been
advised by counsel that there may be one or more legal defenses available
to it which are different from or in addition to those available to the
indemnifying party and that the assertion of such defenses would create a
conflict of interest such that counsel employed by the indemnifying party
could not faithfully represent the indemnified party (in which case, if
such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such
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action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection
with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the
reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred
to in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party
and indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether
any Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such
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Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the
limitations set forth in Section 9.7(a) and Section 9.7(b), any
reasonable legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault
of such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred. In the event that it shall be
subsequently determined that the recipient of any such periodic payment
shall not be entitled to indemnification hereunder, such recipient
promptly shall repay such payments, together with interest thereon at the
Agreed Rate from the date of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the
completion of any offering of Registrable Securities pursuant to a
registration statement under this Section 9, and otherwise.
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9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to
have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities
or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or
agented registration), during the 5-day period prior to, and during the 45-day
period beginning on, the date such registration statement is declared effective
under the Securities Act by the Commission, provided that such WS Holder is
timely notified of such effective date in writing by the Company or such
managing underwriter.
9.9. Additional Covenants of the Company. The Company hereby
agrees and covenants as follows:
(a) The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If
the Company is not required to file reports pursuant to the Exchange Act,
upon the request of any WS Holder, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of
the Securities Act, and take such further action as may be reasonably
required from time to time and as may be within the reasonable control of
the Company, to enable the WS Holders to Transfer Warrants or Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities
Act or any similar rule or regulation hereafter adopted by the
Commission. In addition, promptly upon the request of any WS Holder, the
Company shall provide such WS Holder with such publicly available
financial statements, reports and other information as may be required to
permit such WS Holder to Transfer shares of Registrable Securities to
Qualified Institutional Investors pursuant to Rule 144A of the Securities
Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Common Stock, Convertible Securities or Stock Purchase Rights during the
5 Business Days prior to, and during the 90-day period beginning on,
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the commencement of a public distribution of Registrable Securities
pursuant to any registration statement prepared pursuant to this Section
9 (other than by the Company pursuant to such registration if the
registration is pursuant to Section 9.3 or by the Company pursuant to any
dividend reinvestment plan offered by it to its stockholders). The
Company shall not effect any registration of its securities (other than
on Form S-4, Form S-8, or any successor forms to such forms or pursuant
to such other registration rights agreements as may be approved in
writing by the Majority Selling Holders) or effect any public or private
sale or distribution of any of its securities, including a sale pursuant
to Regulation D under the Securities Act, whether on its own behalf or at
the request of any holder or holders of such securities from the
date of a request for a Demand Registration pursuant to Section 9.2 until
90 days following the effective date of such Demand Registration
statement, unless the Company shall have previously notified in writing
all Selling Holders of the Company's desire to do so, and the Majority
Selling Holders or the managing underwriter, if any, shall have consented
thereto in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant
to which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or
other agreement) shall contain a provision whereby any holder receiving
such Common Stock who will hold more than one percent (1%) of the amount
of such Common Stock then outstanding shall agree not to effect any
public sale or distribution of any such Common Stock during the periods
described in the second sentence of Section 9.9(b), in each case
including a sale pursuant to Rule 144 under the Securities Act (unless
such Person is prevented by applicable statute or regulation from
entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer
or agree to Transfer all or substantially all the Company's assets,
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unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively,
shall have agreed in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which
the WS Holders would be entitled to receive in exchange for Registrable
Securities pursuant to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of Fleet National Bank shall be a sufficient indemnity) and, in case of
mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, in the case of mutilation, no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
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(i) promptly after filing thereof, copies of all regular and
periodic reports, proxy statements (other than preliminary) and
registration statements (other than registration statements on Forms S-3
(relating to debt securities) and S-8) which the Company may file with
the Securities and Exchange Commission or any governmental agency
substituted therefor.
(ii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
or made available by the Company to the holders of any class of
its securities generally or by any Subsidiary of the Company to
the holders of any class of its securities generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice (the
"Call Notice") to the Holders of all outstanding Warrants given at any time on
or after the date of the occurrence of the Triggering Event and before August
31, 1997, to repurchase on the date specified in the notice from each Holder of
a Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series B Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series B Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender of
this Warrant at the Designated Office against payment of the repurchase price
therefor.
14. MISCELLANEOUS
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14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees and expenses incurred by
such Holder in collecting any amounts due hereunder. The Company shall
indemnify, save and hold harmless the Holder hereof and the Holders of any
Warrant Stock issued upon the exercise hereof from and against any and all
liability, loss, cost, damage, reasonable
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<PAGE> 57
attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses incurred in connection with or arising from a Company
Default. This indemnification provision shall be in addition to the rights of
such Holder or Holders to bring an action against the Company for breach of
contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provi sions of Sections
3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and, in the case of Section 9, all Holders of shares of Warrant
Stock issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
14.7. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such
Warrant is exercisable or to increase the price at which such
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<PAGE> 58
shares may be purchased upon exercise of such Warrant (before giving effect
to any adjustment as provided therein) without the written consent of the
Holder thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS
SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 61
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.9
================================================================================
SERIES B WARRANT
to Purchase Common Stock of
NORAND CORPORATION
================================================================================
Warrant No. B - 4
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 13
3.1. Transfer 13
3.2. Division and Combination. 14
3.3. Expenses. 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and Convertible
securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under
this Section 20
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions. 23
7.2 Closing of Transfer Books. 23
8. TRANSFER RESTRICTIONS 23
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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<PAGE> 3
8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures. 30
9.5. Selling Holders' Obligations. 34
9.6. Expenses of Registration. 34
9.7. Indemnification; Contribution. 35
9.8. Holdback. 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver. 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability. 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment. 45
14.8. Severability 45
14.9. Headings. 45
14.10. GOVERNING LAW; JURISDICTION. 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
-ii-
<PAGE> 4
SCHEDULE B UNDERWRITERS AND AGENTS
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<PAGE> 5
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE
TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY
TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR
RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO
THE PROPOSED TRANSFER.
Warrant No. B - 4
SERIES B WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT THE DAIWA BANK, LIMITED, or registered assigns, is
entitled, at any time after August 31, 1997 and prior to the Expiration Date
(such term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from NORAND CORPORATION, a Delaware corporation (the
"Company"), Forty-five Thousand Eight Hundred Fifty-eight (45,858) shares of
the Common Stock of the Company (subject to adjustment as provided herein), at
a purchase price of $21.15 per share (the initial "Exercise Price", subject to
adjustment as provided herein), all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
<PAGE> 6
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with such Person, (b) which beneficially owns or
holds more than ten percent of the outstanding shares of any class of voting
stock of such Person and has the power to vote such shares or (c) more than
ten percent of the outstanding shares of any class of voting stock (or, in
the case of a Person which is not a corporation, more than ten percent of
the equity interest) of which is beneficially owned or held by such Person
and such Person has the power to vote such shares or equity interest. The
term "control" as used with respect to any Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate base
rate of interest announced by The First National Bank of Chicago from time
to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined by
an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and conditions
for the
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<PAGE> 7
appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination of
Appraised Value shall be final and binding on the Company and all affected
holders of Warrants or Warrant Stock. Such Appraised Value shall be
determined as a pro rata portion of the value of the Company taken as a
whole, based on the higher of (A) the value derived from a hypothetical sale
of the entire Company as a going concern by a willing seller to a willing
buyer (neither acting under any compulsion) and (B) the liquidation value of
the entire Company. No discount shall be applied on account of (i) any
Warrants or Warrant Stock representing a minority interest, (ii) any lack of
liquidity of the Common Stock or the Warrants, (iii) the fact that the
Warrants or Warrant Stock may constitute "restricted securities" for
securities law purposes or (iv) the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of
Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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<PAGE> 8
class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.5 hereof) received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.5
hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the Company
to comply in any material respect with any covenant of the Company contained
herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and available
for Transfers of Warrant Stock thereunder for the longer of either (i) any
ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days
during the period specified in the relevant provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable for,
with or without payment of additional consideration in cash or property,
shares of Common Stock, either immediately or upon the occurrence of a
specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the Lenders
party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the average
of the daily market prices of the Common Stock of the Company for the
shorter of (x) the twenty consecutive Business Days immediately preceding
such date or (y) the period commencing on the Business Day next following
the first public announcement of any event giving rise to an adjustment of
the Exercise Price pursuant to Section 4 below
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<PAGE> 9
and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a National
Market System security, the last sale price, regular way, on such day on the
principal stock exchange or market system on which such Common Stock is then
listed or admitted to trading, or, if no such sale takes place on such day,
the average of the closing bid and asked prices for the Common Stock on such
day as reported on such stock exchange or market system or (ii) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or designated as a National Market System security on
NASDAQ but is traded over-the-counter, the average of the closing bid and
asked prices for the Common Stock as reported on NASDAQ or the Electronic
Bulletin Board or in the National Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section 9.2(a)
hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms of
which equity capital are acceptable to the Majority Warrant Holders) raised
by and/or contributed to the Company subsequent to the Original Issue Date
or new Indebtedness (as defined in the Credit Agreement) subordinated to the
Obligations (as defined in the Credit Agreement), provided the terms of such
Indebtedness (including, without limitation, maturity, amortization,
covenants, defaults, remedies and subordination provisions) are acceptable
to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
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<PAGE> 10
"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at
any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to Section 4
hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under the
circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date shall
mean (A) if the Common Stock is publicly traded on such date, the Current
Market Price per share or (B) if the Common Stock is not publicly traded on
such date, (1) the fair market value per share of Common Stock as determined
in good faith by the Board of Directors of the Company and set forth in a
written notice to each Holder or (2) if the Majority Warrant Holders object
in writing to such price as determined by the Board of Directors within
thirty days after receiving notice of same, the Appraised Value per share as
of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding on such date and all
shares of Common Stock issuable in respect of (x) the Warrants outstanding
on such date, (y) any Convertible Securities outstanding on such date and
(z) any other Stock Purchase Rights outstanding on such date, in each case
regardless of whether or not the conversion, exchange, subscription or
purchase rights associated with such Convertible Securities or Stock
Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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<PAGE> 11
"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant or
Warrant Stock is registered on the books of the Company maintained for such
purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or entailing
a finding, that the Company is insolvent or bankrupt, or seeking
reorganization, liquidation, dissolution, winding-up, charter revocation or
other similar relief with respect to the Company or any of its properties,
assets or debts, or seeking the appointment of a receiver, trustee,
custodian, liquidator, sequestrator or similar official for the Company or
any of its properties or assets, or the Company becoming insolvent or
bankrupt or generally unable to pay its debts as they become due, or the
Company voluntarily suspending its business or making a general assignment
for the benefit of creditors; provided that an Insolvency Event shall not be
deemed to have occurred on account of any such proceeding which is
involuntary on the part of the Company unless same shall not have been
dismissed or stayed within 60 days.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting
a security interest under the Uniform Commercial Code or comparable law of
any jurisdiction).
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<PAGE> 12
"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with any
such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced in
Securities Act or bank regulatory matters, as the case may be, chosen by the
Holder of this Warrant or Warrant Stock issued upon the exercise hereof and
reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest
Bank Iowa, National Association and Caisse Nationale de Credit Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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<PAGE> 13
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any Subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock. "Outstanding",
when used with respect to Warrant Stock for the purposes of Section 9 hereof
shall have the meaning set forth in Section 9.1(d) hereof.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body
or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration
or ordering by the Commission of effectiveness of such registration
statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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<PAGE> 14
"Selling Holders" shall mean, with respect to a specified registration
under Section 9 hereof, WS Holders whose Registrable Securities are included
in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to Purchase
Common Stock of Norand Corporation issued concurrently with this Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to Purchase
Common Stock of Norand Corporation, issued concurrently with, and having the
same terms (other than the number of shares purchasable upon the exercise
thereof) as, this Warrant.
"Settlement Stock" shall mean the shares of Common Stock contemplated
to be issued in settlement of the pending shareholders' claims against the
Company with respect to the litigation styled In re Norand Corporation
Securities Litigation, Master File No. C95-323, pending in the United States
District Court for the Northern District of Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in Section 2.1(c)
hereof.
"Shelf Registration" shall have the meaning set forth in Section 9.2(a)
hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not immediately
exercisable, other than the options, warrants or other rights described in
Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company of
Common Stock, Convertible Securities or Stock Purchase Rights after the
Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the Warrants
and any issuance of Common Stock, Convertible Securities or Stock
Purchase Rights (and
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any issuance of Common Stock pursuant to the conversion, exchange or
exercise of any such Convertible Securities or Stock Purchase Rights)
deemed to have been issued as of the Original Issue Date pursuant to
the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant (other
than warrants granted to Jay Alix and Associates and to Donald W.
Rowley for up to the respective number of shares set forth on Schedule
A) granted or issued after the Original Issue Date shall not be less
than the "daily market price" (as that term is defined in the issue of
the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights with respect to which the Majority
Warrant Holders shall have waived application of the provisions of
Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50% (by
number of votes) of the voting stock of which is at the time owned by the
Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries, or any other business entity in which the Company or one or more
Subsidiaries or the Company and one or more Subsidiaries own more than a 50%
interest either in the profits or capital of such business entity or (b) whose
net earnings, or portions thereof, are consolidated with the net earnings of
the Company and are recorded on the books of the Company for financial
reporting purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a "sale" thereof
within the meaning of the Securities Act.
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<PAGE> 16
"Triggering Event" shall mean either the repayment in full of all
indebtedness under the Credit Agreement or the receipt by the Company of at
least $20 million in net cash proceeds from additional Equity.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of
such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants
until such time as such shares of Common Stock have either been (i)
Transferred in a public offering pursuant to a registration statement filed
under the Securities Act or (ii) Transferred in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof with all transfer restrictions and restrictive
legends with respect to such Common Stock being removed in connection with
such transaction. "Warrant Stock", for the purposes of Section 9 hereof,
shall have the meaning set forth in Section 9.1(b) hereof.
"WS Holder" shall have the meaning set forth in Section 9.1(a) hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after August 31, 1997 and
until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise
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<PAGE> 17
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder (as determined pursuant to Section 2.2
below). In order to exercise this Warrant, in whole or in part, the Holder
shall (i) deliver to the Company at the Designated Office a written notice of
the Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of Common
Stock to be purchased, together with this Warrant and (ii) pay to the Company
the Warrant Price (the date on which both such delivery and payment shall have
first taken place being hereinafter sometimes referred to as the "Exercise
Date"). Such Exercise Notice shall be in the form of the subscription form
appearing at the end of this Warrant as Annex A, duly executed by the Holder or
its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current
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<PAGE> 18
Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly
endorsed by or accompanied by appropriate instruments of transfer duly executed
by the Holder or by the Holder's attorney duly authorized in writing. In the
event of any withholding of Warrant Stock or surrender of Common Stock pursuant
to clause (ii) or (iii) above where the number of shares whose Current Market
Price is equal to the Warrant Price is not a whole number, the number of shares
withheld by or surrendered to the Company shall be rounded up to the nearest
whole share and the Company shall make a cash payment to the Holder based on
the incremental fraction of a share being so withheld by or surrendered to the
Company in an amount determined in accordance with Section 2.3 hereof. For the
purpose of making payment of the Warrant Price, any Note surrendered to the
Company shall be deemed to have a value equal to 100% of the principal amount
thereof plus any interest accrued but unpaid thereon. If the Holder delivers a
Note with a deemed value that exceeds the Warrant Price, the Company shall
reissue to the Holder a new Note identical in all respects to the surrendered
Note except that the principal amount of such new Note shall be equal to the
principal amount that, together with any interest accrued but unpaid thereon,
is equal to the deemed value of the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
the shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, issued without violation of any
preemptive rights and free and clear of all Liens (other than any created by
actions of the Holder). The Company shall pay all expenses in connection with,
and all taxes and other governmental charges that may be imposed with respect
to, the issue or delivery thereof, unless such tax or charge is imposed by law
upon the Holder, in which case such taxes or charges shall be paid by the
Holder and the Company shall reimburse the Holder therefor on an After-Tax
Basis.
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<PAGE> 19
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
2.5. Limitation on Regulated Holder's Exercise. Notwithstanding
anything in this Warrant to the contrary, the Holder of this Warrant, if
subject to the Bank Holding Company Act or any provision of the Glass-Steagall
Act, may exercise this Warrant only if the Notice of Exercise is accompanied by
an Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such
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<PAGE> 20
clearances would be obtained or make it likely that such clearances would, if
obtained, contain material conditions adverse to such Holder. In the event
that federal or state regulatory clearances are required prior to the exercise
of this Warrant by the Holder hereof, the Company shall reasonably cooperate
with such Holder in providing such information to any regulatory agency as such
agency may reasonably require. In the event any such regulatory clearance is
withheld or denied, such Holder may continue to hold this Warrant until its
expiration or may sell or otherwise transfer this Warrant in accordance with
the terms hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to compliance with the
applicable provisions of this Warrant, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the Designated Office, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the applicable provisions of this Warrant as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
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<PAGE> 21
3.3. Expenses. The Company shall prepare, issue and deliver at its
own expense any new Warrant or Warrants required to be issued under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is
exercisable and the Exercise Price shall be subject to adjustment from time to
time as set forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time
the Company shall:
(i) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to
the number of shares of Common Stock Outstanding immediately after such
adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If at any
time the Company shall issue or sell any shares of Common Stock in a Subsequent
Issuance for a consideration per share that is less than the Exercise Price in
effect immediately prior to such issuance or sale, then, forthwith upon such
issuance or sale, the Exercise Price shall be reduced to a price calculated by
dividing (1) an amount equal to the sum of (x) the
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<PAGE> 22
number of shares of Common Stock Outstanding immediately prior to such
Subsequent Issuance multiplied by the then existing Exercise Price, plus (y)
the aggregate consideration (determined in accordance with the provisions of
Section 4.6 hereof), if any, received by the Company in connection with such
Subsequent Issuance, by (2) the total number of shares of Common Stock
Outstanding immediately after such Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities.
(a) In the event that the Company shall at any time issue, sell or grant any
Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the
purpose of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock (without giving effect to any antidilution provisions in
such Stock Purchase Rights) that are or may become issuable upon exercise of
such Stock Purchase Rights (or upon exercise of any Convertible Securities
issuable upon exercise of such Stock Purchase Rights) for a consideration per
share equal to (i) the aggregate consideration per share (determined in
accordance with the provisions of Section 4.6 hereof) received by the Company
in connection with the issuance, sale or grant of such Stock Purchase Rights
plus (ii) the minimum amount of such consideration per share receivable by the
Company in connection with the exercise of such Stock Purchase Rights (and the
exercise of any Convertible Securities issuable upon exercise of such Stock
Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such
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<PAGE> 23
Convertible Securities for a consideration per share equal to (i) the aggregate
consideration per share (determined in accordance with the provisions of
Section 4.6 hereof) received by the Company in connection with the issuance or
sale of such Convertible Securities plus (ii) the minimum amount of such
consideration per share receivable by the Company in connection with the
exercise of such conversion or exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall
have been made hereunder as the result of any issuance, sale or grant of any
Stock Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall have been
made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or
the rights of conversion or exchange associated with such Convertible
Securities shall expire by their terms or any of such Stock Purchase Rights or
Convertible Securities shall be repurchased by the Company or a Subsidiary
thereof for a consideration per underlying share of Common Stock not exceeding
the amount of such consideration received by the Company in connection with the
issuance, sale or grant of such Stock Purchase Rights or Convertible
Securities, the Exercise Price then in effect shall forthwith be increased to
the Exercise Price that would have been in effect if such expiring Stock
Purchase Rights or rights of conversion or exchange or such repurchased Stock
Purchase Rights
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or Convertible Securities had never been issued. Similarly, if at any time
after any such adjustment of the Exercise Price shall have been made pursuant
to Section 4.2 (i) any additional consideration is received or becomes
receivable by the Company in connection with the issuance or exercise of such
Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in
the conversion ratio applicable to such Convertible Securities so that fewer
shares of Common Stock will be issuable upon the conversion or exchange thereof
or there is a decrease in the number of shares of Common Stock issuable upon
exercise of such Stock Purchase Rights, the Exercise Price then in effect shall
be forthwith readjusted to the Exercise Price that would have been in effect
had such changes taken place at the time that such Stock Purchase Rights or
Convertible Securities were initially issued, granted or sold. In no event
shall any readjustment under this Section 4.3(d) affect the validity of any
shares of Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustmnt have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment
of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
4.5. Reorganization, Reclassification, Merger, Con solidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or
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disposition of assets, (i) shares of common stock of the successor or acquiring
corporation or of the Company (if it is the surviving corporation) or (ii) any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property") are to be received by or distributed to the holders of Common Stock
of the Company who are holders immediately prior to such transaction, then the
Holder of this Warrant shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In such event, the aggregate Exercise Price
otherwise payable for the shares of Common Stock issuable upon exercise of this
Warrant shall be allocated among the shares of common stock and Other Property
receivable as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets in proportion to the respective fair
market values of such shares of common stock and Other Property as determined
in good faith by the Board of Directors o the Company. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which this Warrant thus becomes exercisable, which
modifications shall be as equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.5, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class that is not preferred as to dividends or assets over any other class
of stock of such corporation and that is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such
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stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 4.5
shall similarly apply to successive reorganizations, reclassifications,
mergers, consolidations or disposition of assets.
4.6. Determination of Consideration. For purposes of Sections 4.2,
4.3 and 4.4 hereof, the consideration received and/or receivable by the Company
in connection with the issuance, sale, grant or exercise of additional shares
of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective
of the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount received by the
Company after deduction of any accrued interest or dividends, expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Company.
(2) Securities or Other Property. In the case of securities or other
property, the fair market value thereof as of the date immediately preceding
such issuance, sale, grant or exercise as determined in good faith by the
Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares of Common
Stock are issued or sold together with other securities or other assets of
the Company for a consideration which covers both, the consideration
received (computed as provided in (1) and (2) above) shall be allocable to
such shares of Common Stock as determined in good faith by the Board of
Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and Convertible
Securities. In case any Stock Purchase Rights or Convertible Securities
shall be issued or sold together with other securities or other assets of
the Company, together comprising one integral transaction in which no
specific consideration is allocated to the Stock
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Purchase Rights or Convertible Securities, the consideration allocable to
such Stock Purchase Rights or Convertible Securities shall be determined in
good faith by the Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company
payable in either case in Common Stock or Convertible Securities, such
Common Stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been issued
or sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any shares of
Common Stock, Stock Purchase Rights or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor shall be
deemed to be the fair value on the date of issuance of such security of such
portion of the assets and business of the non-surviving corporation
attributable to such Common Stock, Stock Purchase Rights or Convertible
Securities, as is determined in good faith by the Company's Board of
Directors.
(7) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination
may be challenged in good faith by the Majority Warrant Holders, and any
dispute shall be resolved by an investment banking or appraisal firm of
recognized national standing selected by the Company and reasonably
acceptable to the Majority Warrant Holders and whose decision shall be
binding on the Company and all holders of Warrants. The fees and expenses of
such firm shall be paid by the party or parties whose position is not chosen
by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights repre-
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<PAGE> 28
sented by this Warrant in accordance with the essential intent and principles
hereof (including, without limitation, the issuance of securities other than
Common Stock which have the right to participate in distributions to the
holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
4.8. Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring such an adjustment shall occur. For the purpose of any such
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
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(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, Convertible
Securities or Stock Purchase Rights or (ii) to subscribe for or purchase
Common Stock, Convertible Securities or Stock Purchase Rights, then all
references in this Section 4 to the date of the issuance or sale of such
shares of Common Stock, Convertible Securities or Stock Purchase Rights
shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution to which the provisions of Section 4.1
would apply, but shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1 above,
at no time shall the Exercise Price per share of Common Stock exceed the
amount set forth in the first paragraph of the preamble of this Warrant.
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock to
be less than the Exercise Price that would result from such transaction.
(g) Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is
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exercisable or the Exercise Price shall be adjusted pursuant to this Section
4, the Company shall forthwith prepare a certificate to be executed by the
President or chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment and the method by
which such adjustment was calculated, specifying the number of shares of
Common Stock for which this Warrant is exercisable and (if such adjustment
was made pursuant to Section 4.5) describing the number and kind of any
other shares of stock or Other Property for which this Warrant is
exercisable, and any related change in the Exercise Price, after giving
effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder in accordance
with Section 15.2. The Company shall keep at its principal office or at the
Designated Office, if different, copies of all such certificates and cause
the same to be available for inspection at said office during normal
business hours by any Holder or any prospective transferee of a Warrant
designated by a Holder thereof.
(h) Independent Application. Except as otherwise provided herein, all
subsections of this Section 4 are intended to operate independently of one
another (but without duplication). If an event occurs that requires the
application of more than one subsection, all applicable subsections shall be
given independent effect without duplication.
5. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be
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necessary or reasonably appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company shall
take all such action as may be necessary or reasonably appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, free and clear of all
Liens, and shall use all commercially reasonably efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or (b) any
amendment of the Certificate of Incorporation of the Company, the Company shall
mail to each Holder of a Warrant in accordance with the provisions of Section
14.2 hereof a notice specifying the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer or disposition is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition,
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and a description in reasonable detail of the transaction. Such notice shall
be mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time,
except upon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares
of Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in
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Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel
to the effect that such legend is not required for the purposes of compliance
with the Securities Act. Holders of the Warrants or the Restricted Common
Stock, as the case may be, shall not be entitled to Transfer such Warrants or
such Restricted Common Stock except in accordance with this Section 8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE
VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF
COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO
RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED
TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE
TO THE PROPOSED TRANSFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF
AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO
THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS
AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
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"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW.
NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK
ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES
MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR
(C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND
SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Not withstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company, at the expense of the Company, a new Warrant
bearing the following legend in place of the restrictive legend set forth
hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN
SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE
OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed
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thereon. Wherever the restrictions imposed by this Section shall terminate as
to any share of Restricted Common Stock, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series A Warrants and the holders
of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to
as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series A Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with respect
to such Common Stock being removed in connection with such transaction,(ii)
any other securities issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange by the Company generally
for, or in replacement by the Company generally of, any shares of Warrant
Stock and (iii) any securities issued in exchange for any such Warrant
Stock in any merger or reorganization of the Company, but in the cases of
clauses (ii) and (iii) only so long as such securities have not been
registered and Transferred pursuant to the Securities Act or Transferred in
a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions and restrictive legends with respect to such
securities are removed in connection with such Transfer.
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(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series A Warrants held by
such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total number
of shares of Warrant Stock Outstanding as of such date plus (ii) the number
of shares of Warrant Stock issuable upon exercise of all outstanding
Warrants and Series A Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series A
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives at
any time after August 31, 1997 a written request from one or more WS Holders
holding in the aggregate at least seventy-six percent of the number of shares
of Warrant Stock then outstanding (the "Demanding Holders") that the Company
file a registration statement under the Securities Act for the sale or other
disposition of at least a majority of the Registrable Securities (a "Demand
Registration"), the Company shall promptly give written notice of such request
to each other WS Holder and each such WS Holder may elect, by giving written
notice of such election to the Company within ten (10) Business Days after
receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for an offering on a delayed or continual basis pursuant to Rule 415
under the Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration, the
Company shall:
(1) File the requested registration statement with the Commission as
promptly as practicable, and shall use all commercially reasonable efforts
to have the registration declared effective under the Securities Act as
soon as reasonably practicable, in each instance giving due
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regard to the need to prepare and file current financial statements,
conduct due diligence and complete other actions that are reasonably
necessary to effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand Registration,
for up to 90 days or until such earlier date as of which all Registrable
Securities covered by such registration statement shall have been disposed
of in the manner described in the registration statement, and (y) if a
Shelf Registration, for 270 days. Notwithstanding the foregoing, if for
any reason the effectiveness of a Demand Registration is suspended or
postponed as permitted by Subsection (d) below, the foregoing period shall
be extended by the aggregate number of days of such suspension or
postponement.
(c) The Company shall not be required to effect a registration
of Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than by reason of a failure on the part of the Selling Holders. If the Company
shall have complied with its obligations under this Section 9, a right to
demand a registration pursuant to this Section 9.2 shall be deemed to have been
satisfied (i) if a Demand Registration other than a Shelf Registration, upon
the earlier of (x) the date as of which all of the Registrable Securities
included therein shall have been disposed of pursuant to the registration
statement and (y) the date as of which such Demand Registration shall have been
Continuously Effective for a period of 90 days, and (ii) if a Shelf
Registration, upon the effective date of a Shelf Registration, provided no stop
order or similar order, or
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proceedings for such an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an
agented offering, the Majority Selling Holders shall have the right to select
the underwriter or underwriters and manager or managers to administer such
underwritten offering or the placement agent or agents for such agented
offering from among the entities listed in Schedule B hereto (or any successors
of any such entities), it being understood that the Majority Selling Holders
shall use commercially reasonable efforts to select one or more of the first
three listed entities subject to arriving at reasonably acceptable terms and
conditions for the offering.
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(f) The Company may elect to include shares of Common Stock to be sold
for its account in any such Demand Registration (including a Shelf
Registration); provided, however, if the managing underwriter shall advise the
Demanding Holders in writing (with a copy to the Company) that, in its opinion,
the number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be realized
therefor, or the timing thereof, then the number of shares proposed to be
included in such Demand Registration by the Company shall be reduced, to such
number that the Demanding Holders are advised can be sold without such effect
in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company proposes
to register (including for this purpose a registration effected by the Company
for shareholders of the Company other than the WS Holders) equity securities
under the Securities Act in connection with the public offering solely for cash
on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company
shall promptly give each WS Holder written notice of such registration (a
"Piggyback Registration"). Upon the written request of each WS Holder given
within 20 days following the date of such notice, the Company shall cause to be
included in such registration statement and use its best efforts to be
registered under the Securities Act all the Registrable Securities that each
such WS Holder shall have requested to be registered. The Company shall have
the absolute right to withdraw or cease to prepare or file any registration
statement for any offering referred to in this Section 9.3 without any
obligation or liability to any WS Holder.
(b) If the managing underwriter shall advise the Company in writing
(with a copy to each Selling Holder) that, in its opinion, the amount of
Registrable Securities requested to be included in such registration would
materially adversely affect such offering, or the timing thereof, then the
Company will include in such registration, to the extent of the amount and
class which the Company is so advised can be sold without such material adverse
effect in such offering: first, all securities proposed to be sold by the
Company for its own account; and second, the Warrant Stock requested to be
included in such registration by WS Holders and all other securities requested
to be included in such registration by Persons other than the Company and WS
Holders, the securities covered by this clause
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second to be included pro rata based on the estimated gross proceeds from the
sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable
Securities included in an unlimited number of Piggyback Registrations pursuant
to this Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2 or
Section 9.3 hereof to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement with
respect to such Warrant Stock and use the Company's best efforts to cause
such registration statement to become effective; provided, however, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement and prior to effectiveness
thereof, the Company shall furnish to one firm of counsel for the Selling
Holders (selected by Majority Selling Holders) copies of all such documents
in the form substantially as proposed to be filed with the Commission at
least four Business Days prior to filing for review and comment by such
counsel, which opportunity to comment shall include an absolute right to
control or contest disclosure if the applicable Selling Holder reasonably
believes that it may be subject to controlling person liability under
applicable securities laws with respect thereto.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with respect
to the disposition of all securities covered by such registration statement.
If the registration is for an underwritten offering, the Company shall amend
the registration statement or supplement the prospectus whenever required by
the terms of the underwriting agreement entered into pursuant to Section
9.4(e). Subject to Rule 415 under the Securities Act, if the registration
statement is a Shelf Registration, the Company shall amend the registration
statement or supplement the prospectus so that it will remain current and in
compliance with the requirements of the Securities Act for 270 days or after
its effective date, and if during such period any event or development
occurs as a result of which the registration statement or prospectus
contains a misstatement 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, the Company shall promptly notify each Selling Holder, amend
the registration
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statement or supplement the prospectus so that each will thereafter comply
with the Securities Act and furnish to each Selling Holder of Registrable
Securities such amended or supplemented prospectus, which each such Holder
shall thereafter use in the Transfer of Warrant Stock covered by such
registration statement. Pending such amendment or supplement each such
Selling Holder shall cease making offers or Transfers of Registerable
Securities pursuant to the prior prospectus. In the event that any
Registrable Securities included in a registration statement subject to, or
required by, this Warrant remain unsold at the end of the period during
which the Company is obligated to use its best efforts to maintain the
effectiveness of such registration statement, theCompany may file a
post-effective amendment to the registration statement for the purpose of
removing such Registrable Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities, without
charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus, including
each preliminary prospectus and any amendments or supplements thereto, in
each case in conformity with the requirements of the Securities Act and the
rules thereunder, and such other related documents as any such Selling
Holder may reasonably request in order to facilitate the disposition of
Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such states or jurisdictions as shall be
reasonably requested by the managing underwriter (as applicable, or if
inapplicable, the Majority Selling
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Holders), and (ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension
of the qualification (or exemption from qualification) of the offer and
transfer of any of the Registrable Securities in any jurisdiction, at the
earliest possible moment; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not be
required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and take
all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
(g) Make generally available to the Company's security holders copies
of all periodic reports, proxy statements, and other information referred to
in Section 9.9(a) and an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 90 days following the end
of the 12-month period beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of each registration
statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and underwriter
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(but not more than one firm of counsel to such Selling Holders), all
financial and other information as shall be reasonably requested by them,
and provide the Selling Holder, any underwriter participating in such
offering and the representatives of such Selling Holder and underwriter the
opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have certified
the audited financial statements included in such registration statement, in
each case all as necessary to enable them to exercise their due diligence
responsibility under the Securities Act; provided, however, that information
that the Company determines, in good faith, to be confidential and which the
Company advises such Person in writing, is confidential shall not be
disclosed unless such Person signs a confidentiality agreement reasonably
satisfactory to the Company or the related Selling Holder of Registrable
Securities agrees to be responsible for such Person's breach of
confidentiality on terms reasonably satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of the
type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company shall
furnish to each Selling Holder a signed counterpart of any such comfort
letter or legal opinion. Delivery of any such opinion or comfort letter
shall be subject to the recipient furnishing such written representations or
acknowledgments as are customarily provided by selling shareholders who
receive such comfort letters or opinions.
(j) Provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a
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recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered with
or approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number for
the Common Stock prior to the effective date of the first registration
statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included in
each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 9 with respect to the Registrable Securities of any Selling Holder that
such Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Selling Holder's Registrable Securities, and to
cooperate with the Company in preparing such registration; and
(ii) Agree to sell their Registrable Securities to the underwriters at
the same price and on substantially the same terms and conditions as the
Company or the other Persons on whose behalf the registration statement was
being filed have agreed to sell their securities, and to execute the
underwriting agreement agreed to by the Majority Selling Holders (in the
case of a registration under Section 9.2) or the Company and the Majority
Selling Holders (in the case of a registration under Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of such
Selling Holder's shares registered for sale pursuant to this Section 9;
provided, however, it is
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understood that any failure so to notify the Company shall not be deemed a
default hereunder or to subject any Selling Holder to any claim for damages
or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all fees
and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the Company,
and of the Company's independent public accountants, including the expenses
of "cold comfort" letters required by or incident to such performance and
compliance, and the reasonable fees and disbursements of one firm of counsel
for the Selling Holders of Registrable Securities (the "Registration
Expenses"), but excluding underwriting discounts and commissions relating to
Registrable Securities (which shall be paid on a pro rata basis by the
Selling Holders) provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to
Section 9.2 if the registration is subsequently withdrawn at the request of
the Majority Selling Holders (in which case all Selling Holders shall bear
such expense), unless WS Holders whose Registrable Securities constitutes a
majority of the Registrable Securities then outstanding agree that such
withdrawn registration shall constitute the exercise of their one demand
registration under Section 9.2 hereof. The counsel for the Selling Holders
shall be selected by Demanding Holders owning a majority of the Registrable
Securities owned by Demanding Holders to be included in a Demand
Registration and, in the case of a Piggyback Registration, by Selling
Holders owning a majority of the Registrable Securities to be included in
such registration; provided that in the case of a Piggyback Registration,
the Selling Holders shall use one firm of counsel to represent all such
holders and shall endeavor in
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good faith, with any other holders of securities to be included in such
registration, to select one firm of counsel to represent all such selling
securities holders.
(b) The Company shall bear and pay all Registration Expenses incurred
in connection with any Piggyback Registrations pursuant to Section 9.3 for
each Selling Holder, but excluding underwriting discounts and commissions
relating to Registrable Securities (which shall be paid on a pro rata basis
by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, and
each officer, director, partner, and employee of such Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party pursuant
to any actual or threatened action, suit, proceeding or investigation, or to
which any of the foregoing Persons may become subject under the Securities
Act, the Exchange Act or other federal or state laws, insofar as such
losses, claims, damages, liabilities and expenses arise out of or are based
upon any of the following statements, omissions or violations pursuant to a
final non-appealable order (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any
amendments or supplements thereto;
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(ii) 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; or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any applicable state securities law
or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any applicable state securities law;
provided, however, that the indemnification required by this Section 9.7(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or expense to the extent that it is determined by a court of competent
jurisdiction by a final non-appealable order to have solely arisen out of or be
based upon a Violation which occurred in reliance upon and in conformity with
written information furnished to the Company by the indemnified party expressly
for use in connection with such registration; provided, further, that the
indemnity agreement contained in this Section 9.7(a) shall not apply to any
underwriter to the extent that any such loss is based on or arises out of an
untrue statement or alleged untrue statement of a material fact, or an omission
or alleged omission to state a material fact, contained in or omitted from any
preliminary prospectus if the final prospectus shall correct such untrue
statement or alleged untrue statement, or such omission or alleged omission,
and a copy of the final prospectus has not been sent or given to such person at
or prior to the confirmation of sale to such person if such underwriter was
under an obligation to deliver such final prospectus and failed to do so. The
Company shall also indemnify underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution,
their officers, directors, agents and employees and each person who controls
such persons (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) to the same extent as provided above with respect to
the indemnification of the Selling Holders.
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(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors, each
of its officers and employees, each Person, if any, who controls the Company
within the meaning of the Securities Act, any other Selling Holder, any
controlling Person of any such other Selling Holder and each officer,
director, partner, and employee of such other Selling Holder and such
controlling Person, against any and all losses, claims, damages, liabilities
and expenses (joint and several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party pursuant
to any actual or threatened action, suit, proceeding or investigation, or to
which any of the foregoing Persons may otherwise become subject under the
Securities Act, the Exchange Act or other federal or state laws, insofar as
such losses, claims, damages, liabilities and expenses are determined by a
court of competent jurisdiction by a final non-appealable order to have
solely arisen out of or be based upon a Violation that occurred in reliance
upon and in conformity with written information furnished by such Selling
Holder expressly for use in connection with such registration; provided,
however, that (x) the indemnification required by this Section 9.7(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if settlement is effected without the consent of the
relevant Selling Holder of Registrable Securities, which consent shall not
be unreasonably withheld, and (y) in no event shall the amount of any
indemnity under this Section 9.7(b) exceed the net proceeds from the
applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this Section
9.7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified
party may make a claim under this Section 9.7, such indemnified party shall
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the
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right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time following the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 9.7 but shall not relieve the indemnifying party of any liability
that it may have to any indemnified party otherwise than pursuant to this
Section 9.7. Any reasonable fees and expenses incurred by the indemnified
party (including any fees and expenses incurred in connection with
investigating or preparing to defend such action or proceeding) shall be
paid to the indemnified party, as incurred, within thirty (30) days of
written notice thereof to the indemnifying party (regardless of whether it
is ultimately determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall have the right
to employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any such action,
claim or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified party
shall have been advised by counsel that there may be one or more legal
defenses available to it which are ifferent from or in addition to those
available to the indemnifying party and that the assertion of such defenses
would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such
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action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection
with any one such action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the reasonable fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all such
indemnified parties, unless in the reasonable judgment of such indemnified
party a conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such action, claim or
proceeding, in which event the indemnifying party shall be obligated to pay
the fees and expenses of such additional counsel or counsels). No
indemnifying party shall be liable to an indemnified party for any
settlement of any action, proceeding or claim without the written consent of
the indemnifying party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been committed by, or
relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
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Violation. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault of
such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred. In the event that it shall be subsequently
determined that the recipient of any such periodic payment shall not be
entitled to indemnification hereunder, such recipient promptly shall repay
such payments, together with interest thereon at the Agreed Rate from the
date of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the completion
of any offering of Registrable Securities pursuant to a registration
statement under this Section 9, and otherwise.
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9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to
have Registrable Securities included in a registration statement prepared
pursuant to this Section 9, if so requested by the managing underwriter in
connection with an offering of any Registrable Securities, shall not effect any
public sale or distribution of shares of Common Stock, Convertible Securities
or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A
under the Securities Act and any sale as part of such underwritten or agented
registration), during the 5-day period prior to, and during the 45-day period
beginning on, the date such registration statement is declared effective under
the Securities Act by the Commission, provided that such WS Holder is timely
notified of such effective date in writing by the Company or such managing
underwriter.
9.9. Additional Covenants of the Company. The Company hereby agrees
and covenants as follows:
(a) The Company shall file as and when applicable, on a timely basis,
all reports required to be filed by it under the Exchange Act. If the
Company is not required to file reports pursuant to the Exchange Act, upon
the request of any WS Holder, the Company shall make publicly available the
information specified in subparagraph (c)(2) of Rule 144 of the Securities
Act, and take such further action as may be reasonably required from time to
time and as may be within the reasonable control of the Company, to enable
the WS Holders to Transfer Warrants or Registrable Securities without
registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the Securities Act or any similar rule
or regulation hereafter adopted by the Commission. In addition, promptly
upon the request of any WS Holder, the Company shall provide such WS Holder
with such publicly available financial statements, reports and other
information as may be required to permit such WS Holder to Transfer shares
of Registrable Securities to Qualified Institutional Investors pursuant to
Rule 144A of the Securities Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of Common
Stock, Convertible Securities or Stock Purchase Rights during the 5 Business
Days prior to, and during the 90-day period beginning on,
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the commencement of a public distribution of Registrable Securities pursuant
to any registration statement prepared pursuant to this Section 9 (other
than by the Company pursuant to such registration if the registration is
pursuant to Section 9.3 or by the Company pursuant to any dividend
reinvestment plan offered by it to its stockholders). The Company shall not
effect any registration of its securities (other than on Form S-4, Form S-8,
or any successor forms to such forms or pursuant to such other registration
rights agreements as may be approved in writing by the Majority Selling
Holders) or effect any public or private sale or distribution of any of its
securities, including a sale pursuant to Regulation D under the Securities
Act, whether on its own behalf or at the request of any holder or holders of
such securities from the date of a request for a Demand Registration
pursuant to Section 9.2 until 90 days following the effective date of such
Demand Registration statement, unless the Company shall have previously
notified in writing all Selling Holders of the Company's desire to do so,
and the Majority Selling Holders or the managing underwriter, if any, shall
have consented thereto in writing.
(c) Any agreement entered into on or after August 31, 1997
pursuant to which the Company or any of its majority owned subsidiaries
issues or agrees to issue any Common Stock (including, without limitation,
any employee stock option, stock purchase agreement, merger agreement or
other agreement) shall contain a provision whereby any holder receiving such
Common Stock who will hold more than one percent (1%) of the amount of such
Common Stock then outstanding shall agree not to effect any public sale or
distribution of any such Common Stock during the periods described in the
second sentence of Section 9.9(b), in each case including a sale pursuant to
Rule 144 under the Securities Act (unless such Person is prevented by
applicable statute or regulation from entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in which
the Company shall not be the surviving corporation or (y) Transfer or agree to
Transfer all or substantially all the Company's assets,
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unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively, shall
have agreed in writing to assume the obligations of the Company under this
Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the WS Holders
would be entitled to receive in exchange for Registrable Securities pursuant
to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of The Daiwa Bank, Limited shall be a sufficient indemnity) and, in case
of mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, in the case of mutilation, no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder of
Warrants or of Warrant Stock one copy of each of the following items:
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(i) promptly after filing thereof, copies of all regular and periodic
reports, proxy statements (other than preliminary) and registration
statements (other than registration statements on Forms S-3 (relating to
debt securities) and S-8) which the Company may file with the Securities and
Exchange Commission or any governmental agency substituted therefor.
(ii) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available by
the Company to the holders of any class of its securities generally or by
any Subsidiary of the Company to the holders of any class of its securities
generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time to
time, reasonably request.
13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice (the
"Call Notice") to the Holders of all outstanding Warrants given at any time on
or after the date of the occurrence of the Triggering Event and before August
31, 1997, to repurchase on the date specified in the notice from each Holder of
a Warrant all of such Warrant for an amount equal to the result (rounded to the
nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the
numerator of which shall be the aggregate number of shares for which this
Warrant may be exercised and the denominator of which shall be the aggregate
number of shares for which all outstanding Series B Warrants may be exercised,
and in all events not more than One Dollar ($1.00) for all Series B Warrants.
On the date of any repurchase of this Warrant pursuant to this Section 13, the
Holder shall assign to the Company such Warrant without any representation or
warranty (except as to title and the absence of Liens), by the surrender of
this Warrant at the Designated Office against payment of the repurchase price
therefor.
14. MISCELLANEOUS
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14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or communication hereunder to be made pursuant
to the provisions of this Warrant shall be sufficiently given or made if in
writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of the
Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss, cost,
damage, reasonable
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attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses incurred in connection with or arising from a Company
Default. This indemnification provision shall be in addition to the rights of
such Holder or Holders to bring an action against the Company for breach of
contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provi sions of Sections
3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and, in the case of Section 9, all Holders of shares of Warrant
Stock issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
14.7. Amendment. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and the Majority Warrant Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such
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shares may be purchased upon exercise of such Warrant (before giving effect to
any adjustment as provided therein) without the written consent of the Holder
thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS
SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 61
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in-fact to register such transfer onto the books of Norand Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 4.N.10
================================================================================
SERIES B WARRANT
to Purchase Common Stock of
NORAND CORPORATION
================================================================================
Warrant No. B - 5
Original Issue
Date: November 20, 1996
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 11
2.1. Manner of Exercise 11
2.2. Payment of Transfer Taxes 12
2.3. Fractional Shares 12
2.4. Continued Validity and Application 13
2.5. Limitation on Regulated Holder's Exercise 13
3. TRANSFER, DIVISION AND COMBINATION 13
3.1. Transfer 13
3.2. Division and Combination. 14
3.3. Expenses. 14
3.4. Maintenance of Books 14
4. ANTIDILUTION PROVISIONS 14
4.1. Stock Dividends, Subdivisions and Combinations 14
4.2. Issuance of Additional Shares of Common Stock 15
4.3. Issuances of Stock Purchase Rights and Convertible
Securities 15
4.4. Adjustment of Number of Shares Purchasable. 17
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets 17
4.6. Determination of Consideration. 18
4.7. Other Dilutive Events 20
4.8. Other Provisions Applicable to Adjustments Under this
Section 20
5. NO IMPAIRMENT 22
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23
7.1. Notices of Corporate Actions. 23
7.2 Closing of Transfer Books. 23
8. TRANSFER RESTRICTIONS 23
8.1. Restrictions on Transfers 24
8.2. Restrictive Legends 24
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8.3. Termination of Securities Law Restrictions 25
9. REGISTRATION RIGHTS 26
9.1. Certain Definitions 26
9.2. Demand Registration 27
9.3. Piggyback Registration 29
9.4. Registration Procedures. 30
9.5. Selling Holders' Obligations. 34
9.6. Expenses of Registration. 34
9.7. Indemnification; Contribution. 35
9.8. Holdback. 40
9.9. Additional Covenants of the Company 40
10. LOSS OR MUTILATION 42
11. OFFICE OF THE COMPANY 42
12. FINANCIAL AND BUSINESS INFORMATION 43
13. REPURCHASE BY THE COMPANY OF WARRANTS 43
14. MISCELLANEOUS 43
14.1. Nonwaiver. 43
14.2. Notice Generally 44
14.3. Indemnification 44
14.4. Limitation of Liability. 44
14.5. Remedies 45
14.6. Successors and Assigns 45
14.7. Amendment. 45
14.8. Severability 45
14.9. Headings. 45
14.10. GOVERNING LAW; JURISDICTION. 45
ANNEX A
SUBSCRIPTION FORM 48
ANNEX B
ASSIGNMENT FORM 49
SCHEDULE A RESERVED SHARES OF COMMON STOCK
ii
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SCHEDULE B UNDERWRITERS AND AGENTS
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NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS
MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED
SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S)
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER.
Warrant No. B - 5
SERIES B WARRANT
NORAND CORPORATION
THIS IS TO CERTIFY THAT NORWEST BANK IOWA, NATIONAL ASSOCIATION, or
registered assigns, is entitled, at any time after August 31, 1997 and prior to
the Expiration Date (such term, and certain other capitalized terms used herein
being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware
corporation (the "Company"), Twenty-six Thousand One Hundred Thirty-two
(26,132) shares of the Common Stock of the Company (subject to adjustment as
provided herein), at a purchase price of $21.15 per share (the initial
"Exercise Price", subject to adjustment as provided herein), all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
<PAGE> 6
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means a Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with such Person, (b) which beneficially
owns or holds more than ten percent of the outstanding shares of any
class of voting stock of such Person and has the power to vote such
shares or (c) more than ten percent of the outstanding shares of any
class of voting stock (or, in the case of a Person which is not a
corporation, more than ten percent of the equity interest) of which is
beneficially owned or held by such Person and such Person has the power
to vote such shares or equity interest. The term "control" as used with
respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"After-Tax Basis", when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total
amount") that, after deduction of all federal, state and local taxes that
are required to be paid by the recipient in respect of the receipt or
accrual of such total amount, is equal to the target amount.
"Agreed Rate" shall mean a rate per annum equal to the corporate
base rate of interest announced by The First National Bank of Chicago
from time to time, changing when and as said corporate base rate changes.
"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such share as of such date as determined
by an investment bank of nationally recognized standing selected by the
Majority Warrant Holders from Schedule B (or any successor of any such
entity), it being understood that the Majority Warrant Holders shall use
commercially reasonable efforts to select one of the first three listed
entities subject to arriving at reasonably acceptable terms and
conditions for the
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appraisal. The Company shall pay the costs and fees of such investment
bank, and the decision of the investment bank making such determination
of Appraised Value shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company
taken as a whole, based on the higher of (A) the value derived from a
hypothetical sale of the entire Company as a going concern by a willing
seller to a willing buyer (neither acting under any compulsion) and (B)
the liquidation value of the entire Company. No discount shall be
applied on account of (i) any Warrants or Warrant Stock representing a
minority interest, (ii) any lack of liquidity of the Common Stock or the
Warrants, (iii) the fact that the Warrants or Warrant Stock may
constitute "restricted securities" for securities law purposes or (iv)
the existence of any call option.
"Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
"Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of Illinois.
"Call" shall have the meaning set forth in Section 13 hereof.
"Call Notice" shall have the meaning set forth in Section 13 hereof.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, par value $.01 per share, as
constituted on the Original Issue Date, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other
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class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.5 hereof) received by or distributed to the holders
of Common Stock of the Company in the circumstances contemplated by
Section 4.5 hereof.
"Company" means Norand Corporation, a Delaware corporation, and any
successor corporation.
"Company Default" means (a) the breach of any warranty or the
inaccuracy in any material respect at the time when made of any
representation made by the Company herein or (b) the failure by the
Company to comply in any material respect with any covenant of the
Company contained herein.
"Continuously Effective", with respect to a specified registration
statement, shall mean that it shall not cease to be effective and
available for Transfers of Warrant Stock thereunder for the longer of
either (i) any ten consecutive Business Days, or (ii) an aggregate of
fifteen Business Days during the period specified in the relevant
provision of Section 9 hereof.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or
exchangeable for, with or without payment of additional consideration in
cash or property, shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of January 25, 1996, as thereafter from time to time
amended, supplemented, restated or modified, among the Company, the
Lenders party thereto and The First National Bank of Chicago, as agent.
"Current Market Price" shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for
the shorter of (x) the twenty consecutive Business Days immediately
preceding such date or (y) the period commencing on the Business Day next
following the first public announcement of any event giving rise to an
adjustment of the Exercise Price pursuant to Section 4 below
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and ending on such date. The "daily market price" for each such Business
Day shall be: (i) if the Common Stock is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a
National Market System security, the last sale price, regular way, on
such day on the principal stock exchange or market system on which such
Common Stock is then listed or admitted to trading, or, if no such sale
takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day as reported on such stock exchange or
market system or (ii) if the Common Stock is not then listed or admitted
to trading on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter,
the average of the closing bid and asked prices for the Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National
Daily Quotation Sheets, as applicable.
"Demand Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Demanding Holders" shall have the meaning set forth in Section
9.2(a) hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Equity" shall mean equity capital (not including the equity capital
attributable to the Settlement Stock, and any mandatory redemption terms
of which equity capital are acceptable to the Majority Warrant Holders)
raised by and/or contributed to the Company subsequent to the Original
Issue Date or new Indebtedness (as defined in the Credit Agreement)
subordinated to the Obligations (as defined in the Credit Agreement),
provided the terms of such Indebtedness (including, without limitation,
maturity, amortization, covenants, defaults, remedies and subordination
provisions) are acceptable to the Majority Warrant Holders.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time
to time.
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"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the initial Exercise Price set forth in the
preamble of this Warrant as adjusted from time to time pursuant to
Section 4 hereof.
"Expiration Date" shall mean August 31, 2002, unless extended under
the circumstances contemplated by Section 9.2(d) hereof.
"Fair Value" per share of Common Stock as of any specified date
shall mean (A) if the Common Stock is publicly traded on such date, the
Current Market Price per share or (B) if the Common Stock is not publicly
traded on such date, (1) the fair market value per share of Common Stock
as determined in good faith by the Board of Directors of the Company and
set forth in a written notice to each Holder or (2) if the Majority
Warrant Holders object in writing to such price as determined by the
Board of Directors within thirty days after receiving notice of same, the
Appraised Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to
be determined, all shares of Common Stock Outstanding on such date and
all shares of Common Stock issuable in respect of (x) the Warrants
outstanding on such date, (y) any Convertible Securities outstanding on
such date and (z) any other Stock Purchase Rights outstanding on such
date, in each case regardless of whether or not the conversion, exchange,
subscription or purchase rights associated with such Convertible
Securities or Stock Purchase Rights are presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78,
Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24
(Seventh) 78, 377, 378), or any similar federal legislation.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other
Warrant or shares of Warrant Stock, the Person in whose name such Warrant
or Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Insolvency Event" shall mean any proceeding being instituted by or
against the Company seeking a declaration or order for relief, or
entailing a finding, that the Company is insolvent or bankrupt, or
seeking reorganization, liquidation, dissolution, winding-up, charter
revocation or other similar relief with respect to the Company or any of
its properties, assets or debts, or seeking the appointment of a
receiver, trustee, custodian, liquidator, sequestrator or similar
official for the Company or any of its properties or assets, or the
Company becoming insolvent or bankrupt or generally unable to pay its
debts as they become due, or the Company voluntarily suspending its
business or making a general assignment for the benefit of creditors;
provided that an Insolvency Event shall not be deemed to have occurred on
account of any such proceeding which is involuntary on the part of the
Company unless same shall not have been dismissed or stayed within 60
days.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement perfecting a security interest under the
Uniform Commercial Code or comparable law of any jurisdiction).
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"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants and/or Warrant Stock representing at
least seventy-six percent (76%) of all Warrants and/or Warrant Stock
(with any such Warrants being deemed to represent, for the purposes of
such calculation, the shares of Warrant Stock then issuable upon exercise
thereof) directly affected by such determination.
"Majority Selling Holders" shall mean those Selling Holders whose
Warrants and/or Warrant Stock included in a registration under Section 9
hereof represents a majority of the Warrants and/or Warrant Stock (with
any such Warrants being deemed to represent, for the purposes of such
calculation, the shares of Warrant Stock then issuable upon exercise
thereof) included therein by all Selling Holders.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Notes" shall mean any of the promissory notes issued by the Company
under the Credit Agreement.
"Opinion of Counsel" means a written opinion of counsel experienced
in Securities Act or bank regulatory matters, as the case may be, chosen
by the Holder of this Warrant or Warrant Stock issued upon the exercise
hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrants were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to each of The First National Bank of
Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited,
Norwest Bank Iowa, National Association and Caisse Nationale de Credit
Agricole.
"Other Property" shall have the meaning set forth in Section 4.5
hereof.
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"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary thereof, and shall
include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Outstanding", when used with respect to Warrant Stock for the purposes
of Section 9 hereof shall have the meaning set forth in Section 9.1(d)
hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Piggyback Registration" shall have the meaning set forth in Section
9.3(a) hereof.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
"Registration Expenses" shall have the meaning set forth in Section
9.6(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth
in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Holders" shall mean, with respect to a specified
registration under Section 9 hereof, WS Holders whose Registrable
Securities are included in such registration.
"Series A Warrants" shall mean all of the Series A Warrants to
Purchase Common Stock of Norand Corporation issued concurrently with this
Warrant.
"Series B Warrants" shall mean all of the Series B Warrants to
Purchase Common Stock of Norand Corporation, issued concurrently with,
and having the same terms (other than the number of shares purchasable
upon the exercise thereof) as, this Warrant.
"Settlement Stock" shall mean the shares of Common Stock
contemplated to be issued in settlement of the pending shareholders'
claims against the Company with respect to the litigation styled In re
Norand Corporation Securities Litigation, Master File No. C95-323,
pending in the United States District Court for the Northern District of
Iowa, Cedar Rapids Division.
"Share Withholding Option" has the meaning set forth in Section
2.1(c) hereof.
"Shelf Registration" shall have the meaning set forth in Section
9.2(a) hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not
immediately exercisable, other than the options, warrants or other rights
described in Schedule A hereto.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after
the Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the
Warrants and any issuance of Common Stock, Convertible Securities
or Stock Purchase Rights (and
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any issuance of Common Stock pursuant to the conversion, exchange
or exercise of any such Convertible Securities or Stock Purchase
Rights) deemed to have been issued as of the Original Issue Date
pursuant to the definition of Fully Diluted Outstanding.
(ii) Any issuance of Common Stock pursuant to the exercise of
the options and warrants described in Schedule A hereto, provided,
however, that the exercise price of any such option or warrant
(other than warrants granted to Jay Alix and Associates and to
Donald W. Rowley for up to the respective number of shares set
forth on Schedule A) granted or issued after the Original Issue
Date shall not be less than the "daily market price" (as that term
is defined in the definition of Current Market Price) of the Common
Stock on the date of grant or issue of the option or warrant.
(iii) The issuance of the Settlement Stock.
(iv) Any other issuance of Common Stock, Convertible
Securities or Stock Purchase Rights with respect to which the
Majority Warrant Holders shall have waived application of the
provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or
more Subsidiaries, or any other business entity in which the Company or
one or more Subsidiaries or the Company and one or more Subsidiaries own
more than a 50% interest either in the profits or capital of such
business entity or (b) whose net earnings, or portions thereof, are
consolidated with the net earnings of the Company and are recorded on the
books of the Company for financial reporting purposes in accordance with
GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a
"sale" thereof within the meaning of the Securities Act.
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"Triggering Event" shall mean either the repayment in full of all
indebtedness under the Credit Agreement or the receipt by the Company of
at least $20 million in net cash proceeds from additional Equity.
"Violation" has the meaning set forth in Section 9.7(a) hereof.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as
of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such
Original Warrants or any other such Warrant. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise
of Warrants until such time as such shares of Common Stock have either
been (i) Transferred in a public offering pursuant to a registration
statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof with all
transfer restrictions and restrictive legends with respect to such Common
Stock being removed in connection with such transaction. "Warrant
Stock", for the purposes of Section 9 hereof, shall have the meaning set
forth in Section 9.1(b) hereof.
"WS Holder" shall have the meaning set forth in Section 9.1(a)
hereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) From and after August 31, 1997 and
until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise
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this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder (as determined pursuant to Section 2.2
below). In order to exercise this Warrant, in whole or in part, the Holder
shall (i) deliver to the Company at the Designated Office a written notice of
the Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of Common
Stock to be purchased, together with this Warrant and (ii) pay to the Company
the Warrant Price (the date on which both such delivery and payment shall have
first taken place being hereinafter sometimes referred to as the "Exercise
Date"). Such Exercise Notice shall be in the form of the subscription form
appearing at the end of this Warrant as Annex A, duly executed by the Holder or
its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Current Market Price equal to such
Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the
Company shares of Common Stock previously acquired by the Holder with an
aggregate Current
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<PAGE> 18
Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly
endorsed by or accompanied by appropriate instruments of transfer duly executed
by the Holder or by the Holder's attorney duly authorized in writing. In the
event of any withholding of Warrant Stock or surrender of Common Stock pursuant
to clause (ii) or (iii) above where the number of shares whose Current Market
Price is equal to the Warrant Price is not a whole number, the number of shares
withheld by or surrendered to the Company shall be rounded up to the nearest
whole share and the Company shall make a cash payment to the Holder based on
the incremental fraction of a share being so withheld by or surrendered to the
Company in an amount determined in accordance with Section 2.3 hereof. For the
purpose of making payment of the Warrant Price, any Note surrendered to the
Company shall be deemed to have a value equal to 100% of the principal amount
thereof plus any interest accrued but unpaid thereon. If the Holder delivers a
Note with a deemed value that exceeds the Warrant Price, the Company shall
reissue to the Holder a new Note identical in all respects to the surrendered
Note except that the principal amount of such new Note shall be equal to the
principal amount that, together with any interest accrued but unpaid thereon,
is equal to the deemed value of the surrendered Note less the Warrant Price.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, issued without violation of any
preemptive rights and free and clear of all Liens (other than any created by
actions of the Holder). The Company shall pay all expenses in connection with,
and all taxes and other governmental charges that may be imposed with respect
to, the issue or delivery thereof, unless such tax or charge is imposed by law
upon the Holder, in which case such taxes or charges shall be paid by the
Holder and the Company shall reimburse the Holder therefor on an After-Tax
Basis.
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2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price of one share of Common Stock on the Exercise Date, if the Common
Stock is then publicly traded.
2.4. Continued Validity and Application. (a) A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, to be entitled to all rights and to be
subject to all obligations that are applicable to such Holder by the terms of
this Warrant under Section 9 hereof. The Company shall, at the time of any
exercise of this Warrant or any transfer of Warrant Stock, upon the request of
the Holder of the shares of Warrant Stock issued in connection with such
exercise or transfer, acknowledge in writing, in a form reasonably satisfactory
to such Holder, its continuing obligation to afford to such Holder such rights
referred to in this Section 2.4; provided, however, that if such Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything
in this Warrant to the contrary, the Holder of this Warrant, if subject to the
Bank Holding Company Act or any provision of the Glass-Steagall Act, may
exercise this Warrant only if the Notice of Exercise is accompanied by an
Opinion of Counsel of such Holder to the effect that, as of the date of
delivery of such opinion, no federal or state regulatory clearances are
required for such Holder to exercise this Warrant or, in the event any such
federal or state regulatory clearances are required prior to the exercise of
this Warrant, to the effect that all such clearances have been obtained or, if
not then obtained, that no statute or regulation or regulatory policy or
guidelines known to such counsel would by their terms preclude the obtaining of
such clearances or make it unlikely that such
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<PAGE> 20
clearances would be obtained or make it likely that such clearances would, if
obtained, contain material conditions adverse to such Holder. In the event
that federal or state regulatory clearances are required prior to the exercise
of this Warrant by the Holder hereof, the Company shall reasonably cooperate
with such Holder in providing such information to any regulatory agency as such
agency may reasonably require. In the event any such regulatory clearance is
withheld or denied, such Holder may continue to hold this Warrant until its
expiration or may sell or otherwise transfer this Warrant in accordance with
the terms hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 8 hereof, each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the Designated Office, together with a
written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney. Upon such surrender and delivery, the
Company shall, subject to Section 8, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by the new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to compliance with the applicable
provisions of this Warrant, this Warrant may be divided or combined with other
Warrants upon presentation hereof at the Designated Office, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with the applicable provisions of this Warrant as to any transfer
which may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
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<PAGE> 21
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense any new Warrant or Warrants required to be issued under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to
the number of shares of Common Stock Outstanding immediately after such
adjustment.
4.2. Issuance of Additional Shares of Common Stock. (a) If at any time
the Company shall issue or sell any shares of Common Stock in a Subsequent
Issuance for a consideration per share that is less than the Exercise Price in
effect immediately prior to such issuance or sale, then, forthwith upon such
issuance or sale, the Exercise Price shall be reduced to a price calculated by
dividing (1) an amount equal to the sum of (x) the
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<PAGE> 22
number of shares of Common Stock Outstanding immediately prior to such
Subsequent Issuance multiplied by the then existing Exercise Price, plus (y)
the aggregate consideration (determined in accordance with the provisions of
Section 4.6 hereof), if any, received by the Company in connection with such
Subsequent Issuance, by (2) the total number of shares of Common Stock
Outstanding immediately after such Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a)
In the event that the Company shall at any time issue, sell or grant any Stock
Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose
of Section 4.2 above, the Company shall be deemed to have issued at that time a
number of shares of Common Stock equal to the maximum number of shares of
Common Stock (without giving effect to any antidilution provisions in such
Stock Purchase Rights) that are or may become issuable upon exercise of such
Stock Purchase Rights (or upon exercise of any Convertible Securities issuable
upon exercise of such Stock Purchase Rights) for a consideration per share
equal to (i) the aggregate consideration per share (determined in accordance
with the provisions of Section 4.6 hereof) received by the Company in
connection with the issuance, sale or grant of such Stock Purchase Rights plus
(ii) the minimum amount of such consideration per share receivable by the
Company in connection with the exercise of such Stock Purchase Rights (and the
exercise of any Convertible Securities issuable upon exercise of such Stock
Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such
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<PAGE> 23
Convertible Securities for a consideration per share equal to (i) the aggregate
consideration per share (determined in accordance with the provisions of
Section 4.6 hereof) received by the Company in connection with the issuance or
sale of such Convertible Securities plus (ii) the minimum amount of such
consideration per share receivable by the Company in connection with the
exercise of such conversion or exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall have
been made hereunder as the result of any issuance, sale or grant of any Stock
Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or
the rights of conversion or exchange associated with such Convertible
Securities shall expire by their terms or any of such Stock Purchase Rights or
Convertible Securities shall be repurchased by the Company or a Subsidiary
thereof for a consideration per underlying share of Common Stock not exceeding
the amount of such consideration received by the Company in connection with the
issuance, sale or grant of such Stock Purchase Rights or Convertible
Securities, the Exercise Price then in effect shall forthwith be increased to
the Exercise Price that would have been in effect if such expiring Stock
Purchase Rights or rights of conversion or exchange or such repurchased Stock
Purchase Rights or Convertible Securities had never been issued. Similarly, if
at any time after any such adjustment of the Exercise Price shall have been
made pursuant to Section 4.2 (i) any additional consideration is received or
becomes receivable by the Company in connection with the issuance or exercise
of such Stock Purchase Rights
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<PAGE> 24
or Convertible Securities or (ii) there is a reduction in the conversion ratio
applicable to such Convertible Securities so that fewer shares of Common Stock
will be issuable upon the conversion or exchange thereof or there is a decrease
in the number of shares of Common Stock issuable upon exercise of such Stock
Purchase Rights, the Exercise Price then in effect shall be forthwith
readjusted to the Exercise Price that would have been in effect had such
changes taken place at the time that such Stock Purchase Rights or Convertible
Securities were initially issued, granted or sold. In no event shall any
readjustment under this Section 4.3(d) affect the validity of any shares of
Warrant Stock issued upon any exercise of this Warrant prior to such
readjustment, nor shall any such readjustment have the effect of increasing the
Exercise Price above the Exercise Price that would have been in effect if the
related Stock Purchase Rights or Convertible Securities had never been issued.
4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of
the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder
hereof shall thereafter be entitled to purchase upon the exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
4.5. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or
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<PAGE> 25
disposition of assets, (i) shares of common stock of the successor or acquiring
corporation or of the Company (if it is the surviving corporation) or (ii) any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property") are to be received by or distributed to the holders of Common Stock
of the Company who are holders immediately prior to such transaction, then the
Holder of this Warrant shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In such event, the aggregate Exercise Price
otherwise payable for the shares of Common Stock issuable upon exercise of this
Warrant shall be allocated among the shares of common stock and Other Property
receivable as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets in proportion to the respective fair
market values of such shares of common stock and Other Property as determined
in good faith by the Board of Directors of the Company. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which this Warrant thus becomes exercisable, which
modifications shall be as equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.5, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class that is not preferred as to dividends or assets over any other class
of stock of such corporation and that is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such
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<PAGE> 26
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 4.5
shall similarly apply to successive reorganizations, reclassifications,
mergers, consolidations or disposition of assets.
4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3
and 4.4 hereof, the consideration received and/or receivable by the Company in
connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any accrued interest or
dividends, expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company.
(2) Securities or Other Property. In the case of securities
or other property, the fair market value thereof as of the date
immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares
of Common Stock are issued or sold together with other securities
or other assets of the Company for a consideration which covers
both, the consideration received (computed as provided in (1) and
(2) above) shall be allocable to such shares of Common Stock as
determined in good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and
Convertible Securities. In case any Stock Purchase Rights or
Convertible Securities shall be issued or sold together with other
securities or other assets of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to the Stock Purchase Rights or Convertible Securities,
the consideration allocable to such Stock
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<PAGE> 27
Purchase Rights or Convertible Securities shall be determined in
good faith by the Board of Directors of the Company.
(5) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or
Convertible Securities, such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or
sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the
fair value on the date of issuance of such security of such
portion of the assets and business of the non-surviving
corporation attributable to such Common Stock, Stock Purchase
Rights or Convertible Securities, as is determined in good faith
by the Company's Board of Directors.
(7) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good faith
by the Majority Warrant Holders, and any dispute shall be resolved
by an investment banking or appraisal firm of recognized national
standing selected by the Company and reasonably acceptable to the
Majority Warrant Holders and whose decision shall be binding on
the Company and all holders of Warrants. The fees and expenses of
such firm shall be paid by the party or parties whose position is
not chosen by such firm.
4.7. Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights repre-
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<PAGE> 28
sented by this Warrant in accordance with the essential intent and principles
hereof (including, without limitation, the issuance of securities other than
Common Stock which have the right to participate in distributions to the
holders of Common Stock, the granting of "phantom stock" rights or "stock
appreciation rights" or the repurchase of outstanding shares of Common Stock,
Convertible Securities or Stock Purchase Rights for a purchase price exceeding
the fair market value thereof), then, in each such case, the Majority Warrant
Holders may select an independent investment banking firm of nationally
recognized standing and reasonably acceptable to the Company to make a
determination as to the adjustment, if any, required to be made on a basis
consistent with the essential intent and principles established herein as a
result of such event in order to preserve the purchase rights represented by
the Warrants. If the investment bank selected by the Majority Warrant Holders
is not reasonably acceptable to the Company, and the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank
making such determination shall be final and binding on the Company and all
affected holders of Warrants or Warrant Stock. Promptly after receipt of the
opinion of such investment bank as to any such required adjustments, the
Company shall take any actions necessary to implement same.
4.8. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
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(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase
Rights, then all references in this Section 4 to the date of the issuance
or sale of such shares of Common Stock, Convertible Securities or Stock
Purchase Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1
above, at no time shall the Exercise Price per share of Common Stock
exceed the amount set forth in the first paragraph of the preamble of
this Warrant.
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause
the Exercise Price to be less than the par value of the Common Stock, if
any, unless the Company first reduces the par value of the Common Stock
to be less than the Exercise Price that would result from such
transaction.
(g) Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is
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<PAGE> 30
exercisable or the Exercise Price shall be adjusted pursuant to
this Section 4, the Company shall forthwith prepare a certificate
to be executed by the President or chief financial officer of the
Company setting forth, in reasonable detail, the event requiring
the adjustment and the method by which such adjustment was
calculated, specifying the number of shares of Common Stock for
which this Warrant is exercisable and (if such adjustment was made
pursuant to Section 4.5) describing the number and kind of any
other shares of stock or Other Property for which this Warrant is
exercisable, and any related change in the Exercise Price, after
giving effect to such adjustment or change. The Company shall
promptly cause a signed copy of such certificate to be delivered
to each Holder in accordance with Section 15.2. The Company shall
keep at its principal office or at the Designated Office, if
different, copies of all such certificates and cause the same to
be available for inspection at said office during normal business
hours by any Holder or any prospective transferee of a Warrant
designated by a Holder thereof.
(h) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an
event occurs that requires the application of more than one
subsection, all applicable subsections shall be given independent
effect without duplication.
5. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or reasonably appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company shall take all such action as may be
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<PAGE> 31
necessary or reasonably appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all Liens, and shall use all
commercially reasonably efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1. Notices of Corporate Actions. In the event of: (a) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person or (b) any
amendment of the Certificate of Incorporation of the Company, the Company shall
mail to each Holder of a Warrant in accordance with the provisions of Section
14.2 hereof a notice specifying the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer or disposition is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition,
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and a description in reasonable detail of the transaction. Such notice shall
be mailed to the extent practicable at least thirty, but not more than ninety,
days prior to the date therein specified; provided, that, in no event shall the
Company be required to give the Holders notice of material non-public
information prior to the time such information is made available to the holders
of its Common Stock. In the event that the Company at any time sends any other
notice to the holders of its Common Stock, it shall concurrently send a copy of
such notice to each Holder of a Warrant.
7.2 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1. Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from the registration provisions thereof. No Transfer of
this Warrant or any such shares of Restricted Stock, other than pursuant to
such an effective registration statement, shall be valid or effective unless
(a) the holder of the securities proposed to be transferred shall have
delivered to the Company either a no-action letter from the Commission or an
Opinion of Counsel to the effect that such proposed Transfer is exempt from the
registration requirements of the Securities Act or (b) such Transfer is being
made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder
shall have delivered to the Company a certificate setting forth the basis for
applying such Rule to the proposed Transfer. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective registration
statement, shall bear the restrictive legend set forth in Section 8.2(a), and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in
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Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel
to the effect that such legend is not required for the purposes of compliance
with the Securities Act. Holders of the Warrants or the Restricted Common
Stock, as the case may be, shall not be entitled to Transfer such Warrants or
such Restricted Common Stock except in accordance with this Section 8.1.
8.2. Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS
(A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE
COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH
RULE TO THE PROPOSED TRANSFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
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<PAGE> 34
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF
SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
8.3. Termination of Securities Law Restrictions. Notwithstanding
the foregoing provisions of this Section 8, the restrictions imposed by
Section 8.1(b) upon the transferability of the Warrants and the Restricted
Common Stock and the legend requirements of Section 8.2 shall terminate as to
any particular Warrant or shares of Restricted Common Stock when the Company
shall have received from the Holder thereof an Opinion of Counsel to the effect
that such legend is not required in order to ensure compliance with the
Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2
shall terminate as to this Warrant, as hereinabove provided, the Holder hereof
shall be entitled to receive from the Company, at the expense of the Company, a
new Warrant bearing the following legend in place of the restrictive legend set
forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed
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thereon. Wherever the restrictions imposed by this Section shall terminate as
to any share of Restricted Common Stock, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 8.2(a).
9. REGISTRATION RIGHTS
9.1. Certain Definitions. For the purposes of this Section 9:
(a) The Holders of Warrants and the Series A Warrants and the
holders of Warrant Stock (as defined in Section 9.1(b)) are collectively
referred to as "WS Holders".
(b) "Warrant Stock" shall deemed to include (i) the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants and the Series A Warrants until such time as such
shares of Common Stock have either been (a) Transferred in a public
offering pursuant to a registration statement filed under the Securities
Act or (b) Transferred in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof with all transfer restrictions and restrictive legends with
respect to such Common Stock being removed in connection with such
transaction,(ii) any other securities issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in
exchange by the Company generally for, or in replacement by the Company
generally of, any shares of Warrant Stock and (iii) any securities issued
in exchange for any such Warrant Stock in any merger or reorganization of
the Company, but in the cases of clauses (ii) and (iii) only so long as
such securities have not been registered and Transferred pursuant to the
Securities Act or Transferred in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect to such securities are removed in
connection with such Transfer.
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(c) Each WS Holder shall be deemed to "hold", as of any specified
date, the aggregate of (i) the number of shares of Warrant Stock held by
such WS Holder as of such date plus (ii) the number of shares of Warrant
Stock issuable upon exercise of any Warrants and Series A Warrants held
by such WS Holder as of such date.
(d) The total number of shares of Warrant Stock deemed
"outstanding" as of a specified date will be equal to (i) the total
number of shares of Warrant Stock Outstanding as of such date plus (ii)
the number of shares of Warrant Stock issuable upon exercise of all
outstanding Warrants and Series A Warrants as of such date.
(e) "Registrable Securities" shall mean any Warrants, any Series A
Warrants and/or any shares of Warrant Stock.
9.2. Demand Registration. (a) In the event the Company receives
at any time after August 31, 1997 a written request from one or more WS
Holders holding in the aggregate at least seventy-six percent of the number of
shares of Warrant Stock then outstanding (the "Demanding Holders") that the
Company file a registration statement under the Securities Act for the sale or
other disposition of at least a majority of the Registrable Securities (a
"Demand Registration"), the Company shall promptly give written notice of such
request to each other WS Holder and each such WS Holder may elect, by giving
written notice of such election to the Company within ten (10) Business Days
after receipt of the Company's notice, to have some or all of the Registrable
Securities held by it included in such registration. At the option of the
Demanding Holders, such request may specify that the requested registration
will be for an offering on a delayed or continual basis pursuant to Rule 415
under the Securities Act (a "Shelf Registration").
(b) Following receipt of such a request for a Demand Registration,
the Company shall:
(1) File the requested registration statement with the
Commission as promptly as practicable, and shall use all
commercially reasonable efforts to have the registration declared
effective under the Securities Act as soon as reasonably practicable, in
each instance giving due
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regard to the need to prepare and file current financial statements,
conduct due diligence and complete other actions that are reasonably
necessary to effect a registered public offering; and
(2) Use all commercially reasonable efforts to keep the such
registration statement Continuously Effective (x) if a Demand
Registration, for up to 90 days or until such earlier date as of which
all Registrable Securities covered by such registration statement shall
have been disposed of in the manner described in the registration
statement, and (y) if a Shelf Registration, for 270 days.
Notwithstanding the foregoing, if for any reason the effectiveness of a
Demand Registration is suspended or postponed as permitted by Subsection
(d) below, the foregoing period shall be extended by the aggregate number
of days of such suspension or postponement.
(c) The Company shall not be required to effect a registration of
Registrable Securities pursuant to a Demand Registration on more than one
occasion. For purposes of this Subsection (c), registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than by reason of a failure on the part of the Selling Holders. If the Company
shall have complied with its obligations under this Section 9, a right to
demand a registration pursuant to this Section 9.2 shall be deemed to have been
satisfied (i) if a Demand Registration other than a Shelf Registration, upon
the earlier of (x) the date as of which all of the Registrable Securities
included therein shall have been disposed of pursuant to the registration
statement and (y) the date as of which such Demand Registration shall have been
Continuously Effective for a period of 90 days, and (ii) if a Shelf
Registration, upon the effective date of a Shelf Registration, provided no stop
order or similar order, or
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proceedings for such an order, is thereafter entered or initiated.
(d) The Company shall be entitled to postpone for up to 90 days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 9.2 or suspend any such Demand Registration
for up to 90 days, if the Board of Directors of the Company determines, in its
good faith reasonable judgment that such registration and the Transfer of
Warrant Stock contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Subsection (d) the
filing of any other Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 9.2, or suspended any such Demand
Registration, during the 12 month period ended on the date of the relevant
request pursuant to Subsection (a) above and provided further, that the
Expiration Date shall be extended by the period of any such postponement or
suspension.
(e) A registration pursuant to this Section 9.2 shall be on such
appropriate registration form of the Commission available to the Company as
shall (i) be selected by the Company and be reasonably acceptable to the
Majority Selling Holders and (ii) permit the disposition of the Warrant Stock
in accordance with the intended method or methods of disposition specified in
the request made pursuant to Subsection (a) above. If any registration
pursuant to this Section 9.2 involves an underwritten offering (whether on a
"firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an
agented offering, the Majority Selling Holders shall have the right to select
the underwriter or underwriters and manager or managers to administer such
underwritten offering or the placement agent or agents for such agented
offering from among the entities listed in Schedule B hereto (or any successors
of any such entities), it being understood that the Majority Selling Holders
shall use commercially reasonable efforts to select one or more of the first
three listed entities subject to arriving at reasonably acceptable terms and
conditions for the offering.
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(f) The Company may elect to include shares of Common Stock to be sold for
its account in any such Demand Registration (including a Shelf Registration);
provided, however, if the managing underwriter shall advise the Demanding
Holders in writing (with a copy to the Company) that, in its opinion, the
number of shares of Common Stock requested to be included in such Demand
Registration would adversely affect such offering or the price to be realized
therefor, or the timing thereof, then the number of shares proposed to be
included in such Demand Registration by the Company shall be reduced, to such
number that the Demanding Holders are advised can be sold without such effect
in such Demand Registration.
9.3. Piggyback Registration. (a) If at any time the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders of the Company other than the WS Holders) equity securities under
the Securities Act in connection with the public offering solely for cash on
Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall
promptly give each WS Holder written notice of such registration (a "Piggyback
Registration"). Upon the written request of each WS Holder given within 20
days following the date of such notice, the Company shall cause to be included
in such registration statement and use its best efforts to be registered under
the Securities Act all the Registrable Securities that each such WS Holder
shall have requested to be registered. The Company shall have the absolute
right to withdraw or cease to prepare or file any registration statement for
any offering referred to in this Section 9.3 without any obligation or
liability to any WS Holder.
(b) If the managing underwriter shall advise the Company in writing (with
a copy to each Selling Holder) that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, or the timing thereof, then the Company will
include in such registration, to the extent of the amount and class which the
Company is so advised can be sold without such material adverse effect in such
offering: first, all securities proposed to be sold by the Company for its own
account; and second, the Warrant Stock requested to be included in such
registration by WS Holders and all other securities requested to be included in
such registration by Persons other than the Company and WS Holders, the
securities covered by this clause
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second to be included pro rata based on the estimated gross proceeds from the
sale thereof.
(c) Each WS Holder shall be entitled to have its Registrable
Securities included in an unlimited number of Piggyback Registrations
pursuant to this Section 9.3.
9.4. Registration Procedures. Whenever required under Section 9.2
or Section 9.3 hereof to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement
with respect to such Warrant Stock and use the Company's best efforts to
cause such registration statement to become effective; provided, however,
that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by
reference after the initial filing of the registration statement and
prior to effectiveness thereof, the Company shall furnish to one firm of
counsel for the Selling Holders (selected by Majority Selling Holders)
copies of all such documents in the form substantially as proposed to be
filed with the Commission at least four Business Days prior to filing for
review and comment by such counsel, which opportunity to comment shall
include an absolute right to control or contest disclosure if the
applicable Selling Holder reasonably believes that it may be subject to
controlling person liability under applicable securities laws with
respect thereto.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act and rules thereunder with
respect to the disposition of all securities covered by such registration
statement. If the registration is for an underwritten offering, the
Company shall amend the registration statement or supplement the
prospectus whenever required by the terms of the underwriting agreement
entered into pursuant to Section 9.4(e). Subject to Rule 415 under the
Securities Act, if the registration statement is a Shelf Registration,
the Company shall amend the registration
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statement or supplement the prospectus so that it will remain current and
in compliance with the requirements of the Securities Act for 270 days or
after its effective date, and if during such period any event or
development occurs as a result of which the registration statement or
prospectus contains a misstatement 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, the Company shall promptly notify each
Selling Holder, amend the registration statement or supplement the
prospectus so that each will thereafter comply with the Securities Act
and furnish to each Selling Holder of Registrable Securities such amended
or supplemented prospectus, which each such Holder shall thereafter use
in the Transfer of Warrant Stock covered by such registration statement.
Pending such amendment or supplement each such Selling Holder shall cease
making offers or Transfers of Registerable Securities pursuant to the
prior prospectus. In the event that any Registrable Securities included
in a registration statement subject to, or required by, this Warrant
remain unsold at the end of the period during which the Company is
obligated to use its best efforts to maintain the effectiveness of such
registration statement, the Company may file a post-effective amendment
to the registration statement for the purpose of removing such
Registrable Securities from registered status.
(c) Furnish to each Selling Holder of Registrable Securities,
without charge, such number of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus,
including each preliminary prospectus and any amendments or supplements
thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents
as any such Selling Holder may reasonably request in order to facilitate
the disposition of Registrable Securities owned by such Selling Holder.
(d) Use all commercially reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states or jurisdictions as
shall be reasonably requested by the managing underwriter (as applicable,
or if inapplicable, the Majority Selling
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Holders), and (ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the
offer and transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment; provided, however, that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company
shall also cooperate with the Majority Selling Holders and the managing
underwriter for such offering in the marketing of the Warrant Stock,
including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not
be required to incur any material out-of-pocket expense pursuant to this
sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(g) Make generally available to the Company's security holders
copies of all periodic reports, proxy statements, and other information
referred to in Section 9.9(a) and an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later than 90 days
following the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of each registration statement filed pursuant to this Section 9.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of
such Selling Holder and underwriter
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(but not more than one firm of counsel to such Selling Holders), all
financial and other information as shall be reasonably requested by them,
and provide the Selling Holder, any underwriter participating in such
offering and the representatives of such Selling Holder and underwriter
the opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have
certified the audited financial statements included in such registration
statement, in each case all as necessary to enable them to exercise their
due diligence responsibility under the Securities Act; provided, however,
that information that the Company determines, in good faith, to be
confidential and which the Company advises such Person in writing, is
confidential shall not be disclosed unless such Person signs a
confidentiality agreement reasonably satisfactory to the Company or the
related Selling Holder of Registrable Securities agrees to be responsible
for such Person's breach of confidentiality on terms reasonably
satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of
counsel to the Company, in customary form and covering such matters of
the type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Majority Selling Holders. The Company
shall furnish to each Selling Holder a signed counterpart of any such
comfort letter or legal opinion. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written
representations or acknowledgments as are customarily provided by selling
shareholders who receive such comfort letters or opinions.
(j) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then
listed on a securities exchange or included for quotation in a
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recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered
with or approved by such other United States or state governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company to enable the Selling Holders of Registrable
Securities to consummate the disposition of such Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number
for the Common Stock prior to the effective date of the first
registration statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included
in each such registration.
9.5. Selling Holders' Obligations. (a) It shall be a condition
precedent to the obligations of the Company to take any action pursuant
to this Section 9 with respect to the Registrable Securities of any Selling
Holder that such Selling Holder shall:
(i) Furnish to the Company such information regarding such Selling
Holder, the number of Registrable Securities owned by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Selling Holder's Registrable Securities,
and to cooperate with the Company in preparing such registration; and
(ii) Agree to sell their Registrable Securities to the underwriters
at the same price and on substantially the same terms and conditions as
the Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and to
execute the underwriting agreement agreed to by the Majority Selling
Holders (in the case of a registration under Section 9.2) or the Company
and the Majority Selling Holders (in the case of a registration under
Section 9.3).
(b) Each Selling Holder shall notify the Company of any sales of
such Selling Holder's shares registered for sale pursuant to this Section
9; provided, however, it is
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understood that any failure so to notify the Company shall not be deemed
a default hereunder or to subject any Selling Holder to any claim for
damages or expenses whatsoever.
9.6. Expenses of Registration. Expenses incurred in connection with
registrations under this Section 9 shall be allocated and paid as follows:
(a) With respect to each Demand Registration (including any Shelf
Registration), the Company shall bear and pay all reasonable expenses
incurred in connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registration for each
Selling Holder, including all registration, filing and NASD fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of
one firm of counsel for the Selling Holders of Registrable Securities
(the "Registration Expenses"), but excluding underwriting discounts and
commissions relating to Registrable Securities (which shall be paid on a
pro rata basis by the Selling Holders) provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 9.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense), unless WS
Holders whose Registrable Securities constitutes a majority of the
Registrable Securities then outstanding agree that such withdrawn
registration shall constitute the exercise of their one demand
registration under Section 9.2 hereof. The counsel for the Selling
Holders shall be selected by Demanding Holders owning a majority of the
Registrable Securities owned by Demanding Holders to be included in a
Demand Registration and, in the case of a Piggyback Registration, by
Selling Holders owning a majority of the Registrable Securities to be
included in such registration; provided that in the case of a Piggyback
Registration, the Selling Holders shall use one firm of counsel to
represent all such holders and shall endeavor in
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good faith, with any other holders of securities to be included in such
registration, to select one firm of counsel to represent all such selling
securities holders.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to
Section 9.3 for each Selling Holder, but excluding underwriting discounts
and commissions relating to Registrable Securities (which shall be paid
on a pro rata basis by the Selling Holders of Registrable Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 9.6 shall not relieve the Company of its
obligations under this Section 9.
9.7. Indemnification; Contribution. If any Registrable Securities
are included in a registration statement under this Section 9:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act,
and each officer, director, partner, and employee of such Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may become
subject under the Securities Act, the Exchange Act or other federal or
state laws, insofar as such losses, claims, damages, liabilities and
expenses arise out of or are based upon any of the following statements,
omissions or violations pursuant to a final non-appealable order
(collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein,
or any amendments or supplements thereto;
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(ii) 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; or
(iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any applicable state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any applicable state securities
law;
provided, however, that the indemnification required by this Section
9.7(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or expense to the extent that
it is determined by a court of competent jurisdiction by a final
non-appealable order to have solely arisen out of or be based upon a
Violation which occurred in reliance upon and in conformity with written
information furnished to the Company by the indemnified party expressly
for use in connection with such registration; provided, further, that the
indemnity agreement contained in this Section 9.7(a) shall not apply to
any underwriter to the extent that any such loss is based on or arises
out of an untrue statement or alleged untrue statement of a material
fact, or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the final
prospectus shall correct such untrue statement or alleged untrue
statement, or such omission or alleged omission, and a copy of the final
prospectus has not been sent or given to such person at or prior to the
confirmation of sale to such person if such underwriter was under an
obligation to deliver such final prospectus and failed to do so. The
Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in
the distribution, their officers, directors, agents and employees and
each person who controls such persons (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the
Selling Holders.
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(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors,
each of its officers and employees, each Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling
Holder, any controlling Person of any such other Selling Holder and each
officer, director, partner, and employee of such other Selling Holder and
such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise
become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses are determined by a court of competent
jurisdiction by a final non-appealable order to have solely arisen out of
or be based upon a Violation that occurred in reliance upon and in
conformity with written information furnished by such Selling Holder
expressly for use in connection with such registration; provided,
however, that (x) the indemnification required by this Section 9.7(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which
consent shall not be unreasonably withheld, and (y) in no event shall the
amount of any indemnity under this Section 9.7(b) exceed the net proceeds
from the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9.7 of notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing for which
such indemnified party may make a claim under this Section 9.7, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
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right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of
any such action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified
party under this Section 9.7 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 9.7. Any reasonable fees and expenses incurred
by the indemnified party (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within
thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such
indemnified party shall have the right to employ separate counsel in any
such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying party shall have
failed to promptly assume the defense of such action, claim or proceeding
or (iii) the named parties to any such action, claim or proceeding
(including any impleaded parties) include both such indemnified party and
the indemnifying party, and such indemnified party shall have been
advised by counsel that there may be one or more legal defenses available
to it which are different from or in addition to those available to the
indemnifying party and that the assertion of such defenses would create a
conflict of interest such that counsel employed by the indemnifying party
could not faithfully represent the indemnified party (in which case, if
such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such
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action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection
with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the
reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification required by this Section 9.7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred
to in this Section 9.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party
and indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether
any Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such
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Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or
other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in Section 9.7(d)(i) above. 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.
(e) If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 9.7 without regard to the relative fault
of such indemnifying party or indemnified party or any other equitable
consideration referred to in Section 9.7(d) above.
(f) The indemnification required by this Section 9.7 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred. In the event that it shall be
subsequently determined that the recipient of any such periodic payment
shall not be entitled to indemnification hereunder, such recipient
promptly shall repay such payments, together with interest thereon at the
Agreed Rate from the date of original receipt to the date of repayment.
(g) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 9.7 shall survive the
completion of any offering of Registrable Securities pursuant to a
registration statement under this Section 9, and otherwise.
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<PAGE> 52
9.8. Holdback. Each WS Holder entitled pursuant to this Section 9
to have Registrable Securities included in a registration statement
prepared pursuant to this Section 9, if so requested by the managing
underwriter in connection with an offering of any Registrable Securities, shall
not effect any public sale or distribution of shares of Common Stock,
Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to
Rule 144 or Rule 144A under the Securities Act and any sale as part of such
underwritten or agented registration), during the 5-day period prior to, and
during the 45-day period beginning on, the date such registration statement is
declared effective under the Securities Act by the Commission, provided that
such WS Holder is timely notified of such effective date in writing by the
Company or such managing underwriter.
9.9. Additional Covenants of the Company. The Company hereby
agrees and covenants as follows:
(a) The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If
the Company is not required to file reports pursuant to the Exchange Act,
upon the request of any WS Holder, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of
the Securities Act, and take such further action as may be reasonably
required from time to time and as may be within the reasonable control of
the Company, to enable the WS Holders to Transfer Warrants or Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities
Act or any similar rule or regulation hereafter adopted by the
Commission. In addition, promptly upon the request of any WS Holder, the
Company shall provide such WS Holder with such publicly available
financial statements, reports and other information as may be required to
permit such WS Holder to Transfer shares of Registrable Securities to
Qualified Institutional Investors pursuant to Rule 144A of the Securities
Act.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of
Common Stock, Convertible Securities or Stock Purchase Rights during the
5 Business Days prior to, and during the 90-day period beginning on,
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<PAGE> 53
the commencement of a public distribution of Registrable Securities
pursuant to any registration statement prepared pursuant to this Section
9 (other than by the Company pursuant to such registration if the
registration is pursuant to Section 9.3 or by the Company pursuant to any
dividend reinvestment plan offered by it to its stockholders). The
Company shall not effect any registration of its securities (other than
on Form S-4, Form S-8, or any successor forms to such forms or pursuant
to such other registration rights agreements as may be approved in
writing by the Majority Selling Holders) or effect any public or private
sale or distribution of any of its securities, including a sale pursuant
to Regulation D under the Securities Act, whether on its own behalf or at
the request of any holder or holders of such securities from the date of
a request for a Demand Registration pursuant to Section 9.2 until 90 days
following the effective date of such Demand Registration statement,
unless the Company shall have previously notified in writing all Selling
Holders of the Company's desire to do so, and the Majority Selling
Holders or the managing underwriter, if any, shall have consented thereto
in writing.
(c) Any agreement entered into on or after August 31, 1997 pursuant
to which the Company or any of its majority owned subsidiaries issues or
agrees to issue any Common Stock (including, without limitation, any
employee stock option, stock purchase agreement, merger agreement or
other agreement) shall contain a provision whereby any holder receiving
such Common Stock who will hold more than one percent (1%) of the amount
of such Common Stock then outstanding shall agree not to effect any
public sale or distribution of any such Common Stock during the periods
described in the second sentence of Section 9.9(b), in each case
including a sale pursuant to Rule 144 under the Securities Act (unless
such Person is prevented by applicable statute or regulation from
entering into such an agreement).
(d) Subject to Section 13, the Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or reorganization in
which the Company shall not be the surviving corporation or (y) Transfer
or agree to Transfer all or substantially all the Company's assets,
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<PAGE> 54
unless prior to such merger, consolidation, reorganization or asset
Transfer, the surviving corporation or the Transferee, respectively,
shall have agreed in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which
the WS Holders would be entitled to receive in exchange for Registrable
Securities pursuant to any such merger, consolidation or reorganization.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of Norwest Bank Iowa, National Association shall be a sufficient
indemnity) and, in case of mutilation, upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to such Holder; provided, however, in the case of mutilation, no indemnity
shall be required if this Warrant in identifiable form is surrendered to the
Company for cancellation.
11. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at Cedar Rapids, Iowa. The Company may from time to time change the Designated
Office to another office of the Company or its agent within the United States
by notice given to all registered holders of Warrants at least ten Business
Days prior to the effective date of such change.
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<PAGE> 55
12. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, the Company shall deliver to each Holder
of Warrants or of Warrant Stock one copy of each of the following items:
(i) promptly after filing thereof, copies of all regular and
periodic reports, proxy statements (other than preliminary) and
registration statements (other than registration statements on Forms S-3
(relating to debt securities) and S-8) which the Company may file with
the Securities and Exchange Commission or any governmental agency
substituted therefor.
(ii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
or made available by the Company to the holders of any class of
its securities generally or by any Subsidiary of the Company to
the holders of any class of its securities generally; and
(iii) with reasonable promptness, such other public information
relating to the Company and its Subsidiaries as the Holder may, from time
to time, reasonably request.
13. REPURCHASE BY THE COMPANY OF WARRANTS
The Company shall have the right (the "Call"), upon written notice
(the "Call Notice") to the Holders of all outstanding Warrants given at
any time on or after the date of the occurrence of the Triggering Event and
before August 31, 1997, to repurchase on the date specified in the notice from
each Holder of a Warrant all of such Warrant for an amount equal to the result
(rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a
fraction, the numerator of which shall be the aggregate number of shares for
which this Warrant may be exercised and the denominator of which shall be the
aggregate number of shares for which all outstanding Series B Warrants may be
exercised, and in all events not more than One Dollar ($1.00) for all Series B
Warrants. On the date of any repurchase of this Warrant pursuant to this
Section 13, the Holder shall assign to the Company such Warrant without any
representation or warranty (except as to title and the absence of Liens), by
the surrender
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<PAGE> 56
of this Warrant at the Designated Office against payment of the repurchase
price therefor.
14. MISCELLANEOUS
14.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
14.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three Business Days after the same
shall have been deposited in the United States mail, or one Business Day after
the same shall have been delivered to Federal Express or another overnight
courier service.
14.3. Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder from the date due until the date of payment and (b) such further amounts
as shall be sufficient to cover any costs and expenses including, but not
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<PAGE> 57
limited to, reasonable attorneys' fees and expenses incurred by such Holder in
collecting any amounts due hereunder. The Company shall indemnify, save and
hold harmless the Holder hereof and the Holders of any Warrant Stock issued
upon the exercise hereof from and against any and all liability, loss, cost,
damage, reasonable attorneys' and accountants' fees and expenses, court costs
and all other out-of-pocket expenses incurred in connection with or arising
from a Company Default. This indemnification provision shall be in addition to
the rights of such Holder or Holders to bring an action against the Company for
breach of contract based on such Company Default.
14.4. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
14.6. Successors and Assigns. Subject to the provisions of Sections 3.1,
8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock
issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
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<PAGE> 58
14.7. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such
Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the written consent of the Holder thereof.
14.8. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.9. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS
SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS.
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<PAGE> 59
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
NORAND CORPORATION
By:_________________________
Name:
Title:
[SEAL]
Attest:
By:___________________________
Name:
Title:
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<PAGE> 60
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Norand
Corporation and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is ____________________________________________
and, if such shares of Common Stock shall not include all of the shares
of Common Stock issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the shares of Common Stock issuable
hereunder be delivered to the undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10 (ddddd)
Norand Corporation
Incentive Stock Option Agreement
Name: N. Robert Hammer
THIS AGREEMENT sets forth the terms of a stock option granted under the Norand
Corporation Long-Term Performance Program (the "Plan").
In consideration of the continuing services of Optionee and the covenants set
forth in this Agreement, the Company has granted to Optionee an option (the
"Option") to purchase 100,000 shares of the Company's Common Stock, $.01 par
value, subject to the restrictions and conditions of this Agreement and the
terms of the Plan, which are hereby incorporated by reference herein. Each
such share shall be purchased at a price equal to the closing price for a share
of Common Stock on September 24, 1996, as reported by NASDAQ (the "Option
Price"). The Option is intended to be an incentive stock option under Section
422 of the Internal Revenue Code; provided, however, that to the extent that
the terms of this Option do not satisfy the requirements of Section 422, the
Option shall be a non qualified option.
Date of Grant: September 24, 1996
Per share Option: $16.00
Shares Granted: 100,000
Grant Number:
Optionee hereby agrees that the Option to acquire shares of the Company's
common stock is granted pursuant to and in accordance with the terms of the
Company's Long-Term Performance Program and the Stock Option Grant Agreement
(such Stock Option Grant Agreement being attached hereto as Exhibit A)(the
"Agreement"), both of which are incorporated herein and made an integral part
of this Agreement, and Optionee further acknowledges receipt of a copy of the
Company's Long-Term Incentive Prospectus and the Company's Stock Option
Agreement.
This Agreement consists of the face page and the terms and conditions attached
hereto.
IN WITNESS WHEREOF, this Agreement has been executed by Optionee, and for
the Company by its duly authorized officer, on the date indicated below.
N. Robert Hammer
- ------------------------- -------------------------------------
DATE OPTIONEE
Norand Corporation
By: James Harrington
----------------------------
<PAGE> 2
Norand Corporation
Incentive Stock Option Agreement
Appendix A
THIS AGREEMENT sets forth the terms of a stock option granted under the Norand
Corporation Long-Term Performance Program (the "Plan").
1. Rights of Participant. The Option shall entitle Optionee to purchase
shares of Common Stock if applicable conditions are satisfied prior to the
cancellation, termination or surrender of the Option. The Option shall
not entitle Optionee to any other rights, including but not limited to any
rights as a stockholder of the Company.
2. Exercise of Option. Unless accelerated in the discretion of the
Compensation Committee of the Board of Directors of the Company (the
"Committee") or as otherwise provided herein or under the terms of the
Plan, the Option shall first become exercisable on the last day of the
114th month following the Grant Date of the Option. Notwithstanding the
preceding sentence:
(a) the Option shall become exercisable in full upon the occurrence of
a Change in Control (as defined below) of the Company upon a Change
in Control (as defined below) of the Company which occurs prior to
the tenth anniversary of the Date of Grant of the Option and prior
to the expiration date of the Option, the Option shall immediately
become fully exercisable; provided, however, that no such
acceleration shall occur upon a Change in Control to the extent it
is determined that such acceleration will adversely affect
pooling-of-interest accounting method to be applied to any
transaction constituting a Change in Control; and
(b) the Option shall become exercisable in accordance with the terms
and conditions described in and to the extent provided in that
certain letter dated October 11, 1996 from the Committee to the
Optionee, which letter is incorporated herein by reference.
Notwithstanding any other provision of the Agreement or of the Plan, if
the Option becomes exercisable for the first time during a calendar year
under the foregoing provisions with respect to share with a fair market
value in excess of $100,000 (determined by aggregating all plans of the
Company and its subsidiaries), the Option shall be a non qualified stock
option with respect to shares in excess of such limitation.
For purposes of this Agreement, a "Change in Control" shall be deemed to
have occurred for purposes of this Agreement if:
<PAGE> 3
(1) any "Person", as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company, any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company, and any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
such proportionately owned corporation), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of
the Company representing 40% or more of the combined voting
power of the Company's then outstanding securities having the
right to vote for the election of directors;
(2) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 60% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person acquires more than 15% of the
Company's then outstanding securities having the right to vote
for the election of directors. or
(3) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
Once a Change in Control has occurred for purposes of this Agreement, no
future events will constitute a Change in Control for purposes of this
Agreement.
3. Expiration of Option. The Option shall expire as to all shares on the
earlier of (a) the tenth anniversary of the Date of Grant of the
Option, (b) the date that is 90 days after the employment of Optionee
with the Company and all subsidiaries terminates for any reason other
than death or disability, or (c) the first anniversary of the date the
employment of Optionee with the Company and all subsidiaries
terminates by reason of disability or by reason of death. If the
Optionee is an officer or director of the Company or an employee in
Band E or higher, this grant will not be effective until a Norand
Employee Confidentiality and Invention Assignment Agreement is signed
and returned to the Norand Account Manager, Client Services,
StockPlan, Inc.
<PAGE> 4
4. Transferability. The Option may not be transferred other than by will
or the applicable laws of descent or distribution. The Option shall
not otherwise be transferred, assigned, pledged or hypothecated for
any purpose whatsoever and is not subject, in whole or in part, to
execution, attachment, or similar process. Any attempted assignment,
transfer, pledge or hypothecation or other disposition of the Option,
other than in accordance with the terms set forth herein, shall be
void and of no effect.
5. Procedure for Exercise. Subject to the terms of paragraph 3, the
Option may be exercised in whole or in part by filing a written notice
in accordance with the prospectus prior to the date the Option
expires. Such notice shall specify the number of shares of Common
Stock that the Optionee elects to purchase and shall be accompanied by
payment of the Option Price for each such share of Common Stock.
Subject to the provisions of the following sentence, payment of the
Option Price (including applicable withholding taxes in accordance
with paragraph 7 next below) shall be by cash or by certified or
cashier's check payable to the Company. At the Optionee's election,
all or a portion of such Option Price may be paid by delivery of
shares of Common Stock of the Company having an aggregate fair market
value which is equal to the amount of cash which would otherwise be
required.
6. Withholding Taxes. Upon the exercise of the Option, the Company shall
have the right to require Optionee to remit to the Company an amount
sufficient to satisfy all federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates
for shares of Common Stock. The Optionee may satisfy the obligations
of this Section by surrendering shares of Common Stock to the Company
or having shares withheld by the Company with an aggregate fair market
value equal to the amount required to be withheld.
7. Administrative Rules. The Option shall be governed by such
administrative regulations as the Committee shall from time to time
adopt.
8. Miscellaneous.
(a) Amendment and Termination. The Committee may from time
to time alter, amend or suspend the Plan or the Option, or may at any
time terminate the Plan. No action taken by the Committee may
materially and adversely affect the Option without the consent of
Optionee.
(b) Applicable Law. All questions pertaining to the
validity, construction and administration of the Plan, this Agreement,
and the Option represented hereby shall be determined in conformity
with the internal laws of the State of Iowa.
<PAGE> 5
(c) Notices. Every direction, revocation or notice
authorized or required hereunder shall be deemed delivered to the
Company (i) on the date it is personally delivered to the Secretary of
the Company at its principal executive offices, or (ii) three business
days after it is sent by registered or certified mail, postage
prepaid, addressed to the Secretary at such offices; and shall be
deemed delivered to the Optionee (i) on the date it is personally
delivered to him or her, or (ii) three business days after it is sent
by registered or certified mail, postage prepaid, addressed to him or
her at the last address shown for him or her on the records of the
Company.
<PAGE> 1
EXHIBIT 10 (eeeee)
Change in Control Severance Policy
Policy
This policy shall become effective as of the date on which a change in control
occurs and shall be applicable to eligible categories of individuals (as
indicated in the Appendix hereto) whose employment is terminated in a covered
termination following a change in control. An employee who receives severance
benefits pursuant to this policy shall not be entitled to severance benefits
under any other plan or policy of the company. The company (or its successor)
may condition the receipt of severance benefits upon the return of a signed
severance agreement.
Covered Terminations
For purposes of this policy, material benefits shall be medical, dental, life,
disability, pension, profit sharing or stock option benefits and other material
perquisites.
Position An eligible employee's position may be eliminated
Elimination coincident with or within 2 years following a change in control
and, in such case, the employee's termination of employment in
connection with such elimination shall be treated as a covered
termination.
Change in If, coincident with or within 2 years following a
Duties change in control, there is a material adverse change in an
eligible employee's level of duties or level of reporting
relationships, without his consent, from those in effect
immediately prior to the change in control (as the same may have
been enhanced from time to time), the employee's termination of
employment within 30 days of such change shall be treated as a
covered termination.
Change in If, coincident with or within 2 years following a
Salary and/or change in control, there is (i) a reduction in
Benefits an eligible employee's rate of base salary or bonus, or (ii) a
material adverse change in the material benefits applicable to
the employee, as compared to those applicable to the employee
immediately prior to the change in control (as the same may have
been enhanced from time to time), the employee's termination of
employment within 30 days of such change shall be treated as a
covered termination.
<PAGE> 2
Change in If, coincident with or within 2 years following a
Location change in control, an eligible employee is relocated to an
office or job location that is more than thirty miles from his
office or job location immediately prior to the change in
control (except for required travel on business to an extent
substantially consistent with his business travel obligations as
in effect immediately prior to the change in control), the
employee's termination of employment within 30 days of such
change shall be treated as a covered termination.
Notwithstanding the foregoing, none of the foregoing events shall constitute a
covered termination for purposes of this policy if the eligible employee's
employment is terminated on account of cause. For purposes of this policy, the
term "cause" shall mean the eligible employee's willful violation of any
policy, rule or procedure of the company, misconduct which represents a serious
deviation from generally accepted norms of behavior or unsatisfactory
performance of duties.
Severance Benefits
If an eligible employee is terminated in a covered termination, the severance
payable pursuant to this policy shall be as follows:
Level 1: (a) Lump sum cash payment equal to two times the greater of (i) the
sum of the employee's annual base salary and annual bonus (determined
as though all targets had been met in the year of termination) as in
effect on the date of termination, or (ii) the sum of the employee's
annual base salary and annual bonus (determined as though all targets
had been met in the year of the change in control) as in effect
immediately prior to the change in control, (b) continuation of
material benefits (as in effect immediately prior to termination) for
two years following termination; and (c) outplacement services.
Level 2: Lump sum cash payment equal to the greater of (i) the sum of the
employee's annual base salary and annual bonus (determined as though
all targets had been met in the year of termination) as in effect on
the date of termination, or (ii) the sum of the employee's annual
base salary and annual bonus (determined as though all targets had
been met in the year of the change in control) as in effect
immediately prior to the change in control, (b) continuation of
material benefits (as in effect immediately prior to termination) for
one
<PAGE> 3
year following termination; and (c) outplacement services.
Pay or benefits in effect as of any date shall be determined without regard to
any material adverse change in such pay or benefits in anticipation of a change
in control or termination, as applicable.
Final Paycheck
Contingent upon the return of all company property, an eligible employee's
final paycheck will be available on the usual pay day and will be mailed to the
employee's home. Any outstanding account receivable or expense advances from
the employee will be deducted from the final paycheck unless contrary to
applicable federal, state, or Canadian laws.
Amendments
The severance policy may be modified at any time by the company; provided,
however, that the policy may not be amended for 2 years following a change in
control in a manner which reduces the amount of any severance benefit that may
be provided pursuant to the policy, adversely modifies the types of events that
will constitute covered terminations for purposes of this policy or limits the
class of eligible employees.
Definitions of Change in Control
For purposes of this severance policy, a "change in control" shall be deemed to
have occurred for purposes of this policy if:
(1) any "Person", as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") (other
than the Company, any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, and any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or such proportionately owned
corporation), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 40% or more of
the combined voting power of the Company's then outstanding
securities having the right to vote for the election of directors;
(2) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(i) a merger or consolidation
<PAGE> 4
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 60% of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person acquires more than 15% of the
Company's then outstanding securities having the right to vote for
the election of directors. or
(3) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
Once a change in control has occurred for purposes of this policy, no future
events will constitute a change in control for purposes of this policy.
<PAGE> 5
APPENDIX TO SEVERANCE POLICY
CATEGORIES OF ELIGIBLE EMPLOYEES
LEVEL 1
General Counsel
Director-Human Resources & Organizational Development
Vice President-Sales & Systems, Americas
Vice President-Systems Integration & Business Planning
Vice President-Operations & Information Technology
Sr. Vice President-Sales and Marketing
Vice President-European Operations
Vice President-Research & Development
Chief Financial Officer
LEVEL 2
Patent Attorney
Director-Information Systems and Services
Sr. Engineering Consultant (3)
Chief Technical Officer
Director-West Coast Operations
Director-Systems & Communications
Director-Product Line Development and Support
Controller, Assistant Treasurer
Director-Strategic Planning, Corporate Taxes & Systems Integration
Director-Manufacturing Operations
Director-New Products Introduction
Director-Corporation Procurement & Materials
Director-Corporate Quality
Director-Marketing and Portable Products
Director-Channel Sales, Marketing
Director-Communications Products
Director-Americas Systems
Director-Industry Marketing
Director-National Service
<PAGE> 1
EXHIBIT 10 (fffff)
Change in Control Benefit Agreement
This Agreement, made this 11th day of October, 1996, by and between
Norand Corporation (the "Company") and N. Robert Hammer (the "Executive");
WITNESSETH THAT:
WHEREAS, the Executive has been awarded options the vesting of which
may be accelerated upon a Change in Control and the Company has determined that
it is appropriate to provide the Executive with certain additional benefits in
the event of a Change in Control;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, and for other good and valuable consideration receipt
whereof is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. Change in Control. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if:
(a) any "Person", as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company, any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company, and any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
such proportionately owned corporation), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of
the Company representing 40% or more of the combined voting
power of the Company's then outstanding securities having the
right to vote for the election of directors;
(b) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 60% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person acquires more than 15% of the
Company's then outstanding securities having the right to vote
for the election of directors; or
<PAGE> 2
(c) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
Once a Change in Control has occurred for purposes of this Agreement, no future
events will constitute a Change in Control for purposes of this Agreement.
2. Gross-up Payment. The following provisions shall apply in the
event that it is determined that acceleration of the vesting of the stock
option awarded to the Executive on September 24, 1996 (the "Stock Option") upon
a Change in Control would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"):
(a) In the event it shall be determined that acceleration of the
vesting of the Stock Option upon a Change in Control would be
subject to the excise tax imposed by Section 4999 of the Code,
determined without regard to any other payment, benefit or
distribution (or combination thereof) by the Company, any
affiliates of the Company, or one or more trusts established
by the Company or any of its affiliates for the benefit of its
employees, to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to
the terms of this Agreement, or otherwise), the Executive
shall be entitled to receive a payment from the Company (a
"Gross-Up Payment") in an amount equal to the sum of the
following amounts:
(i) the amount of the excise tax attributable solely to
the accelerated vesting of the Stock Option (referred
to as the "Excise Tax") and the amount of any
additional excise tax under section 4999 of the Code
imposed with respect to additional payments, if any,
made pursuant to this paragraph (a);
(ii) any interest or penalties incurred by the Executive
with respect to the Excise Tax and other payments, if
any, made pursuant to this paragraph (a); and
(iii) any taxes, including income taxes, incurred by the
Executive on the Excise Tax and other payments, if
any, made pursuant to this paragraph (a).
(b) Subject to the provisions of paragraph (c) below, all
determinations required to be made under this Section 2,
including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
-2-
<PAGE> 3
a nationally recognized certified public accounting firm as
may be designated by the Company (the "Accounting Firm") which
shall provide detailed supporting calculations both to the
Company and the Executive within fifteen (15) business days of
the acceleration of the vesting of the Stock Option, or such
earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this
Section 2, shall be paid by the Company to the Executive
within five (5) days after the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall so
indicate to the Executive in writing. Any determination by
the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to
paragraph (c) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day
period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company;
-3-
<PAGE> 4
(iii) cooperate with the Company in good faith in order to
effectively contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
paragraph (c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on
an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that if the Executive
is required to extend the statute of limitations to enable the Company
to contest such claim, the Executive may limit this extension solely
to such contested amount. The Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to paragraph (c), the Executive
becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company's complying
with the requirements of paragraph (c)) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph (c), a determination is made
that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven
-4-
<PAGE> 5
EXHIBIT10 (fffff)
and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
3. Miscellaneous.
(a) Amendment and Termination. This Agreement may be amended or
modified at any time with the written consent of the Company
and the Executive; provided, however, that prior to a Change
in Control, the Company may modify the payments and benefits
to be provided pursuant to this Agreement without the consent
of the Executive; and provided further that, the payments and
benefits provided pursuant to Section 1 may not be amended for
2 years following a Change in Control in a manner which
reduces the amount of any benefit that may be payable or
provided to the Executive or pursuant to this Agreement.
(b) Applicable Law. All questions pertaining to the validity,
construction and administration of this Agreement shall be
determined in conformity with the internal laws of the State
of Iowa.
(c) Notices. Every notice authorized or required under this
Agreement shall be deemed delivered to the Company (i) on the
date it is personally delivered to the Secretary of the
Company at its principal executive offices, or (ii) three
-5-
<PAGE> 6
EXHIBIT 10(fffff)
business days after it is sent by registered or certified
mail, postage prepaid, addressed to the Secretary at such
offices; and shall be deemed delivered to the Executive (i) on
the date it is personally delivered to him, or (ii) three
business days after it is sent by registered or certified
mail, postage prepaid, addressed to him at the last address
shown for him on the records of the Company.
(d) Withholding. All payments and benefits provided pursuant to
this Agreement shall be subject to customary withholding taxes
and other employment taxes as required with respect to
compensation paid by an employer to an employee.
(e) Executed Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be treated as the
original.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
NORAND CORPORATION
By James Harrington
------------------------------
Its Director, Human Resources
and Organizational Development
------------------------------
EXECUTIVE
N. Robert Hammer
------------------------------
N. Robert Hammer
-6-
<PAGE> 1
EXHIBIT 11
NORAND CORPORATION
COMPUTATION OF PER SHARE INCOME
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
August 31, 1996 August 31, 1995
--------------- ---------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) to common shareholders (in thousands) ($2,395) ($2,395) ($7,866) ($7,866)
========= ========= ========= =========
Earnings Per Share Pursuant to APB 15
Weighted average common shares outstanding 7,574,621 7,574,621 7,515,822 7,515,822
Incremental shares outstanding assuming exercise of weighted
average common stock options granted pursuant to APB 1 0 0 0 0
--------- --------- --------- ---------
Average common and common equivalent shares outstanding
pursuant to APB 15 7,574,621 7,574,621 7,515,822 7,515,822
========= ========= ========= =========
Earnings (loss) per common share pursuant to APB 15 ($0.32) ($0.32) ($1.05) ($1.05)
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
-------------------------------------------------
August 31, 1996 August 31, 1995
--------------- ---------------
Fully Fully
Primary Diluted Primary Diluted
------ ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) to common shareholders (in thousands) ($14,170) ($14,170) ($3,706) ($3,706)
========= ========= ========= =========
Earnings Per Share Pursuant to APB 15
Weighted average common shares outstanding 7,573,017 7,573,017 7,457,923 7,457,923
Incremental shares outstanding assuming exercise of weighted
average common stock options granted pursuant to APB 1 0 0 0 0
---------- --------- --------- ---------
Average common and common equivalent shares outstanding
pursuant to APB 15 7,573,017 7,573,017 7,457,923 7,457,923
========= ========= ========= =========
Earnings (loss) per common share pursuant to APB 15 ($1.87) ($1.87) ($0.50) ($0.50)
========= ========= ========= =========
</TABLE>
61
<PAGE> 1
EXHIBIT 21
Subsidiaries of Norand Corporation
1. Norand International Corporation
Incorporated in Iowa
2. Norand Data Systems, Ltd.
Incorporated in Iowa
3. NAL Corporation
Incorporated in Iowa
4. Norand Japan Limited
Incorporated in Iowa
5. Norand (Italia) S.r.l.
Incorporated in Italy
6. Norand (UK) Limited
Incorporated in the United Kingdom
7. Norand (Denmark) A/S
Incorporated in Denmark
8. Norand Data (Espana) S.A.
Incorporated in Spain
9. Norand GmbH
Incorporated in Germany
10. Norand (Sweden) AB
Incorporated in Sweden
11. Norand (Benelux) B.V.
Incorporated in the Netherlands
12. Norand de Mexico S.A. de C.V.
Incorporated in Mexico
13. NDS Foreign Sales Corporation
Incorporated in Barbados
14. Norand Technology Corporation
Incorporated in Delaware
15. Norand (Australia) Pty Ltd.
Incorporated in Australia
16. Infolink Group Ltd.
Incorporated in Australia
62
<PAGE> 2
EXHIBIT 21
(Continued)
17. Infolink Software Pty. Ltd.
Incorporated in Australia
18. Infolink Computer Services Pty. Ltd.
Incorporated in Australia
63
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated October 15, 1996 (except with respect to the
matter discussed in Note 7, as to which date is November 20, 1996) included in
this Form 10-K into the Company's previously filed registration statements on
Form S-8 (No. 33-74398, 33-89204, and 33-66848) and Form S-3 (No. 33-95610).
Arthur Andersen LLP
Chicago, Illinois
November 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 3,604
<SECURITIES> 0
<RECEIVABLES> 79,119
<ALLOWANCES> 9,278
<INVENTORY> 33,565
<CURRENT-ASSETS> 123,544
<PP&E> 61,144
<DEPRECIATION> 35,543
<TOTAL-ASSETS> 172,065
<CURRENT-LIABILITIES> 129,331
<BONDS> 0
<COMMON> 77
0
0
<OTHER-SE> 42,657
<TOTAL-LIABILITY-AND-EQUITY> 172,065
<SALES> 235,500
<TOTAL-REVENUES> 235,500
<CGS> 141,744
<TOTAL-COSTS> 141,744
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,844
<INTEREST-EXPENSE> 6,256
<INCOME-PRETAX> (20,243)
<INCOME-TAX> (6,073)
<INCOME-CONTINUING> (14,170)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,170)
<EPS-PRIMARY> (1.87)
<EPS-DILUTED> (1.87)
</TABLE>
