Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2/A Pre-Effective Amendment to Registration of 142 740K
Securities by a Small-Business Issuer
2: EX-1 Underwriting Agreement 54 225K
3: EX-4.2 Instrument Defining the Rights of Security Holders 31 107K
4: EX-4.3 Instrument Defining the Rights of Security Holders 38 141K
5: EX-4.4 Instrument Defining the Rights of Security Holders 9 46K
6: EX-5 Opinion re: Legality 3 14K
7: EX-9.1 Voting Trust Agreement 6 27K
8: EX-9.2 Voting Trust Agreement 1 10K
9: EX-9.3 Voting Trust Agreement 1 10K
10: EX-9.4 Voting Trust Agreement 1 10K
11: EX-10.1 Material Contract 17 57K
12: EX-10.2 Material Contract 16 57K
13: EX-10.3 Material Contract 13 47K
14: EX-10.35 Material Contract 12 55K
15: EX-10.36 Material Contract 12 55K
16: EX-10.37 Material Contract 12 55K
17: EX-10.38 Material Contract 11 45K
18: EX-10.39 Material Contract 10 40K
19: EX-10.40 Material Contract 1 10K
20: EX-10.41 Material Contract 23 81K
21: EX-10.42 Material Contract 6 22K
22: EX-10.43 Material Contract 5 23K
23: EX-10.44 Material Contract 6 25K
24: EX-10.45 Material Contract 7 30K
25: EX-10.46 Material Contract 2 11K
26: EX-23.1 Consent of Experts or Counsel 1 8K
EX-4.2 — Instrument Defining the Rights of Security Holders
Exhibit Table of Contents
WARRANT AGREEMENT
This WARRANT AGREEMENT, dated this ____ day of ________, 1996, by and
between SOUND SOURCE INTERACTIVE, INC., a Delaware corporation (the "Company"),
and CORPORATE STOCK TRANSFER COMPANY, a Colorado corporation.
WITNESSETH:
WHEREAS, in connection with (i) the offering to the public (the
"Public Offering") of Two Million Four Hundred Thousand (2,400,000) shares (the
"Shares") of the Company's common stock and One Million Two Hundred Thousand
(1,200,000) redeemable warrants, each warrant entitling the holder thereof to
purchase one Share of the Company's common stock (the "Warrant Stock") pursuant
to that certain Underwriting Agreement (the "Underwriting Agreement") dated
____________, 1996 among the Company, Vincent J. Bitetti, Eric H. Winston, The
Boston Group, L.P. and Joseph Stevens & Company, L.P., as representatives (the
"Representatives") of the several underwriters (the "Underwriters"), (ii) the
over-allotment option granted to the Underwriters in connection with the Public
Offering to purchase up to an additional Three Hundred Sixty Thousand (360,000)
Shares (including 10,000 shares each from Vincent J. Bitetti and Eric H.
Winston) and/or an additional One Hundred Eighty Thousand (180,000) Warrants
(the "Over-Allotment Option"), (iii) the sale by certain selling security
holders of the Company (the "Selling Security Holders") of One Hundred Seven
Thousand Five Hundred (107,500) Shares, Five Million Six Hundred Eighty Nine
Thousand Six Hundred Sixty Five (5,689,665) warrants previously issued by the
Company which shall convert to redeemable warrants having the same terms and
conditions as the warrants to be issued in the Public Offering (collectively
with the warrants issued in the Public Offering, the "Warrants") and Five
Million Eight Hundred Eighty Nine Six Hundred Sixty Five (5,889,665) Shares
issuable upon exercise of the Warrants, (iv) the issuance of Two Million
(2,000,000) Warrants to ASSI, Inc. (the "ASSI Warrants") and (v) the issuance of
warrants to the Representatives (the "Representatives' Warrants") exercisable
for Two Hundred Forty Thousand (240,000) shares of Common Stock and One Hundred
Twenty Thousand (120,000) Redeemable Warrants, plus an additional 120,000
Warrants which may be issued upon exercise of the Representatives' Warrants, the
Company will have outstanding a total of Nine Million Sixty Nine Thousand Six
Hundred Sixty Five (9,069,665) warrants, all of which shall be designated as
"Redeemable Warrants" (referred to herein as "Warrants") (subject to increase as
provided herein (as such term is defined in SECTION 1(u) hereof)).
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Redeemable Warrants; and
WHEREAS, the Company desires Corporate Stock Transfer Company to act
on behalf of the Company, and Corporate Stock Transfer Company is willing to so
act, in connection with the issuance, registration, transfer and exchange of
certificates representing the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the
Representatives, the holders of certificates representing the Warrants and
Corporate Stock Transfer Company, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings, unless the context shall otherwise requires:
(a) "Act" shall have the meaning assigned to such term in
Section 5(b) of this Agreement.
(b) "Change of Shares" shall have the meaning assigned to such
term in SECTION 8(a)(i) of this Agreement.
(c) "Commission" shall have the meaning assigned to such term in
SECTION 5(b) of this Agreement.
(d) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
voting and in the distribution of earnings and assets of the Company without
limit as to amount or percentage.
(e) "Company" shall have the meaning assigned to such term in
the first (1st) paragraph of this Agreement.
(f) "Corporate Office" shall mean the office of the Warrant
Agent (as such term is defined in SECTION 1(y) hereof) at which at any
particular time its principal business in New York, New York, shall be
administered, which office is located on the date hereof at 370 17th Street,
Suite 2350, Denver, Colorado 80202.
(g) "Exchange Act" shall have the meaning assigned to such term
in SECTION 4(b) of this Agreement.
(h) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered Holder (as such
term is defined in SECTION 1(o) hereof) thereof or his attorney duly authorized
in writing, and (ii) payment in cash or by check made
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payable to the Warrant Agent for the account of the Company of the amount in
lawful money of the United States of America equal to the applicable Purchase
Price (as such term is defined in SECTION 1(l) hereof).
(i) "Initial Warrant Exercise Date" shall mean ________, 1997
[ONE YEAR AFTER THE DATE OF THE PROSPECTUS].
(j) "Initial Warrant Redemption Date" shall mean ________, 1997
[ONE YEAR AFTER THE DATE OF THE PROSPECTUS].
(k) "NASD" shall have the meaning assigned to such term in
SECTION 4(b) hereof.
(l) "Purchase Price" shall mean, subject to modification and
adjustment as provided in SECTION 8 hereof, four dollars and forty cents ($4.40)
per share of Common Stock.
(m) "Over-Allotment Option" shall have the meaning assigned to
such term in the first (1st) WHEREAS clause of this Agreement.
(n) "Redemption Date" shall have the meaning assigned to such
term in Section 9(c) hereof.
(o) "Registered Holder" shall mean the person in whose name any
certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to SECTION 6 hereof.
(p) "Representatives" shall have the meaning assigned to such
term in the first (1st) WHEREAS clause of this Agreement.
(q) "Selling Security Holders" shall have the meaning assigned
to such term in the first (1st) WHEREAS clause of this Agreement.
(r) "Shares" shall have the meaning assigned to such term in the
first (1st) WHEREAS clause of this Agreement.
(s) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the Board of Directors of such corporation or corporations
(regardless of whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
(t) "Transfer Agent" shall mean Corporate Stock Transfer
Company, Denver, Colorado, or its authorized successor.
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(u) "Underwriters" shall have the meaning assigned to such term
in the first (1st) WHEREAS clause of this Agreement.
(v) "Representatives' Warrant Agreement" shall mean the
agreement dated as of ___________, 1996 between the Company and the
Representatives relating to and governing the terms and provisions of the
Representatives' Warrants.
(w) "Representatives' Warrants" shall mean the warrants issued
by the Company to the Representatives to purchase up to Two Hundred Forty
Thousand (240,000) shares of Common Stock and One Hundred Twenty Thousand
(120,000) Warrants pursuant to the Representatives' Warrant Agreement.
(x) "Underwriting Agreement" shall have the meaning assigned to
such term in the first (1st) WHEREAS clause of this Agreement.
(y) "Warrant Agent" shall mean Corporate Stock Transfer Company,
Denver, Colorado or its authorized successor.
(z) "Warrant Certificate" shall mean a certificate representing
each of the Warrants substantially in the form annexed hereto as EXHIBIT A.
(aa) "Warrant Expiration Date" shall mean, unless the Warrants
are redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m.
(California time) on __________, 2001, or, if such date shall in the State of
California be a holiday or a day on which banks are authorized to close, then
5:00 p.m. (California time) on the next following day which in the State of
California is not a holiday or a day on which banks are authorized to close,
subject to the Company's right, prior to the Warrant Expiration Date, in its
sole discretion, to extend such Warrant Expiration Date on five (5) business
days prior written notice to the Registered Holders.
(bb) "Warrants" shall have the meaning assigned to such term in
the first (1st) WHEREAS clause of this Agreement.
(cc) "Warrant Stock" shall mean the shares of Common Stock
issuable upon exercise of the Warrants.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) Each Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one (1) share of Common Stock upon the exercise thereof, subject
to modification and adjustment as provided in SECTION 8 hereof.
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(b) Upon execution of this Agreement, Warrant Certificates
representing Eight Million Eight Hundred Eighty Nine Thousand Six Hundred Sixty
Five (8,889,665) Warrants to purchase up to an aggregate of Eight Million Eight
Hundred Eighty Nine Thousand Six Hundred Sixty Five (8,889,665) shares of Common
Stock (subject to modification and adjustment as provided in Section 8 hereof),
shall be executed by the Company and delivered to the Warrant Agent.
(c) Upon exercise of the Over-Allotment Option, in whole or in
part, Warrant Certificates representing up to One Hundred Eighty Thousand
(180,000) Warrants to purchase up to an aggregate of One Hundred Eighty Thousand
(180,000) shares of Common Stock (subject to modification and adjustment as
provided in SECTION 8 hereof) shall be executed by the Company and delivered to
the Warrant Agent.
(d) Upon exercise of the Representatives' Warrants, Warrant
Certificates representing up to One Hundred Twenty Thousand (120,000) Warrants
to purchase up to an aggregate of One Hundred Twenty Thousand (120,000) shares
of Common Stock (subject to modification and adjustment as provided in SECTION 8
hereof and in the Representatives' Warrant Agreement), shall be countersigned,
issued and delivered by the Warrant Agent upon written order of the Company
signed by its Chairman of the Board, Chief Executive Officer, President or a
Vice President and by its Chief Financial Officer or its Secretary or an
Assistant Secretary.
(e) From time to time, up to the Warrant Expiration Date, as the
case may be, the Warrant Agent shall countersign and deliver Warrant
Certificates in required denominations of one or whole number multiples thereof
to the person entitled thereto in connection with any transfer or exchange
permitted under this Agreement. No Warrant Certificates shall be issued except
(i) Warrant Certificates initially issued hereunder, (ii) Warrant Certificates
issued upon any transfer or exchange of Warrants, (iii) Warrant Certificates
issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to SECTION 7 hereof, (iv) Warrant Certificates issued
pursuant to the Representatives' Warrant Agreement (including Warrants in excess
of the One Hundred Twenty Thousand (120,000) Representatives' Warrants issued as
a result of the antidilution provisions contained in the Representatives'
Warrant Agreement), and (v) at the option of the Company, Warrant Certificates
in such form as may be approved by its Board of Directors, to reflect any
adjustment or change in the Purchase Price, the number of shares of Common Stock
purchasable upon the exercise of a Warrant or the redemption price therefor.
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SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Warrants may be listed, or to
conform to usage. The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates).
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though the officer of
the Company who signed such Warrant Certificates had not ceased to hold such
office.
SECTION 4. EXERCISE.
(a) Warrants in denominations of one or whole number multiples
thereof may be exercised commencing at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date or the Redemption Date,
upon the terms and subject to the conditions set forth herein (including the
provisions set forth in SECTIONS 5 and 9 hereof) and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the Exercise Date, provided that the Warrant
Certificate representing such Warrant, with the exercise form thereon duly
executed by the Registered Holder thereof or his attorney duly authorized in
writing, together with payment in cash or by check made payable to the Warrant
Agent for the account of the Company of an amount in lawful money of the United
States of America equal to the applicable Purchase Price, has been received by
the Warrant Agent. The person entitled to receive the securities
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deliverable upon such exercise shall be treated for all purposes as the holder
of such securities as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date and in any event within five (5)
business days after such date, the Warrant Agent on behalf of the Company shall
cause to be issued to the person or persons entitled to receive the same a
Common Stock certificate or certificates for the shares of Common Stock
deliverable upon such exercise, and the Warrant Agent shall deliver the same to
the person or persons entitled thereto. Upon the exercise of any Warrants, the
Warrant Agent shall promptly notify the Company in writing of such fact and of
the number of securities delivered upon such exercise and, subject to Section
4(b) hereof, shall cause all payments in cash or by check made payable to the
order of the Company in respect of the Purchase Price to be deposited promptly
in the Company's bank account.
(b) The Company has appointed the Representatives as the
exclusive solicitation agents for the Warrants, and has agreed to pay the
Representatives a commission equal to five percent (5%) of the exercise price of
the Warrants, payable on the date of the exercise thereof. The Company has
agreed that it will not solicit the exercise of the Warrants other than through
the Representatives. Upon exercise of any Warrants, the Representative
responsible for the solicitation of exercise of such Warrants shall be
identified by the holder of the Warrants, and the commission payable for
exercise of such Warrants shall be paid to the Representative so designated.
(c) At any time upon the exercise of any Warrants after the
Initial Warrant Exercise Date, the Warrant Agent shall, on a daily basis, within
two (2) business days after any such exercise, notify the designated
Representative or its successors or assigns of the exercise of any such Warrants
and shall, on a weekly basis (subject to collection of funds constituting the
tendered Purchase Price, but in no event later than five (5) business days after
the last day of the calendar week in which such funds were tendered), remit to
the designated Representative or its successors or assigns an amount equal to
five percent (5%) of the Purchase Price of such Warrants being then exercised
unless the Representative or its successors or assigns shall have notified the
Warrant Agent that the payment of such amount with respect to any such Warrant
is violative of the rules and regulations promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the rules and regulations
of the National Association of Securities Dealers, Inc. (the "NASD") or
applicable state securities or "blue sky" laws, in which event the Warrant Agent
shall have to pay such amount to the Company; PROVIDED, HOWEVER, that the
Warrant Agent shall not be obligated to pay any amounts pursuant to this SECTION
4(c) during any week that such amounts payable are less than one thousand
dollars ($1,000) and the Warrant Agent's obligation to make such payments shall
be suspended until the amount payable aggregates one thousand dollars ($1,000),
and provided further,
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that, in any event, any such payment (regardless of amount) shall be made not
less frequently than monthly. Under current rules of the NASD, amounts can be
paid to the Representatives upon any exercise of a Warrant under this Section
4(c) only if (i) the market price of the Company's Common Stock is greater than
the then Purchase Price of the Warrants, (ii) the exercise of the Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
("NASD"), (iii) the Warrant was not held in a discretionary account, (iv)
disclosure of compensation arrangements has been made in documents provided to
customers both as part of the original offering and at the time of exercise and
(v) the solicitation of the exercise of the Warrant was not in violation of Rule
10b-6 (as such rule or any successor rule may be in effect as of such time of
exercise) promulgated under the Securities Exchange Act of 1934. The provisions
of this Section 4(b) may not be modified, amended or deleted without the prior
written consent of the Representatives.
(d) The Company shall not be obligated to issue any fractional
share interests or fractional warrant interests upon the exercise of any Warrant
or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fraction equal to or greater than one-half shall be
rounded up to the next full share or Warrant, as the case may be. Any fraction
less than one-half shall be eliminated.
SECTION 5. RESERVATION OF SHARES; LISTING, PAYMENT OF TAXES; ETC.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that, upon exercise of the Warrants and payment of the
Purchase Price for the shares of Common Stock underlying the Warrants, all
shares of Common Stock which shall be issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable, free from all preemptive or
similar rights, and free from all taxes, liens and charges with respect to the
issuance thereof, and that upon issuance such shares shall be listed or quoted
on each securities exchange or NASDAQ, if any, on which the other shares of
outstanding Common Stock of the Company are then listed.
(b) The Company covenants that if any securities reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal securities laws or
a post-effective amendment to a registration statement, use its best efforts to
cause the same to become effective, keep such registration statement current
while any of
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the Warrants are outstanding and deliver a prospectus which complies with
Section 10(a)(3) of the Securities Act of 1933, as amended (the "Act"), to the
Registered Holder exercising the Warrant (except, if in the opinion of counsel
to the Company, such registration is not required under the federal securities
law or if the Company receives a letter from the staff of the Securities and
Exchange Commission (the "Commission") stating that it would not take any
enforcement action if such registration is not effected). The Company will use
its best efforts to obtain appropriate approvals or registrations under the
state "blue sky" securities laws of all states in which Registered Holders
reside. Warrants may not be exercised by, nor may shares of Common Stock be
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares of Common Stock
upon exercise of the Warrants; PROVIDED, HOWEVER, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
(e) Nothing contained in this Agreement shall be constructed as
conferring upon any Registered Holder the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, the Company shall adopt a
resolution for the liquidation, dissolution or winding up of the Company's
business, then the Company shall give written notice of the adoption of such
resolution to all Registered Holders. No such liquidation, dissolution or
winding-up of the Company's affairs shall commence until at least thirty (30)
days after such written notice is given, at which time the right of the
Registered Holders to participate in the liquidation, dissolution or winding-up
of the Company's affairs shall terminate unless the Redeemable Warrants are
exercised within such thirty (30) day period.
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SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof. Upon due presentment
for registration of transfer of any Warrant Certificate at such office, the
Company shall execute and the Warrant Agent shall issue and deliver to the
transferee or transferees a new Warrant Certificate or Certificates representing
an equal aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
assignment form, as the case may be, on the reverse thereof shall be duly
endorsed or be accompanied by a written instrument or instruments of
subscription or assignment, in form satisfactory to the Company and the Warrant
Agent, duty executed by the Registered Holder thereof or his attorney duly
authorized in writing.
(d) No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates. However, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange shall be promptly canceled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. LOSS OR MUTILATION.
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate and
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(in the case of loss, theft or destruction) of indemnity satisfactory to them,
and (in case of mutilation) upon surrender and cancellation thereof, the Company
shall execute and the Warrant Agent shall countersign and deliver in lieu
thereof a new Warrant Certificate, representing an equal number of Warrants.
Applicants for a substitute Warrant Certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF
COMMON STOCK DELIVERABLE.
(a) (i) Except as hereinafter provided, in the event the
Company shall, at any time or from time to time after the date hereof, sell any
shares of Common Stock for a consideration per share less than the Purchase
Price or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price for the Warrants (whether
or not the same shall be issued and outstanding) in effect immediately prior to
such Change of Shares shall be changed to a price (including any applicable
fraction of a cent to the nearest cent) determined by dividing (A) the sum of
(x) the total number of shares of Common Stock outstanding immediately prior to
such Change of Shares, multiplied by the Purchase Price in effect immediately
prior to such Change of Shares, and (y) the consideration, if any, received by
the Company upon such sale, issuance, subdivision or combination by (B) the
total number of sham of Common Stock outstanding immediately after such Change
of Shares; PROVIDED, HOWEVER, that in no event shall the Purchase Price be
adjusted pursuant to this computation to an amount in excess of the Purchase
Price in effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a)(i) the following provisions shall be applicable:
(A) In case of the issuance or sale of shares of Common Stock
(or of other securities deemed hereunder to involve the issuance or sale of
shares of Common Stock) for a consideration part or all of which shall be cash,
the amount of the cash portion of the consideration therefor deemed to have been
received by the Company shall be (i) the subscription price, if shares of Common
Stock are offered by the Company for subscription, or (ii) the public offering
price (before deducting therefrom any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection therewith),
if such securities are sold to under-
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writers or dealers for public offering without a subscription offering, or (iii)
the gross amount of cash actually received by the Company for such securities,
in any other case.
(B) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, and otherwise than
on the exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash or as
part of a unit, the amount of the consideration therefor other than cash deemed
to have been received by the Company or the amount received per share as part of
a unit shall be the value of such consideration as determined in good faith by
the Board of Directors of the Company on the basis of a record of values of
similar property, services or securities.
(C) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(D) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in Section 8(a)(i)(B) hereof.
(E) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(ii) Upon each adjustment of the Purchase Price pursuant to
this Section 8, the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall be the number derived by multiplying the number
of shares of Common Stock purchasable immediately prior to such adjustment by
the Purchase Price in effect prior to such adjustment and dividing the product
so obtained by the applicable adjusted Purchase Price.
-12-
(b) In case the Company shall at any time after the date hereof
issue options, rights or warrants to subscribe for shares of Common Stock, or
issue any securities convertible into or exchangeable for shares of Common
Stock, for a consideration per share (determined as provided in Section 8(a)(i)
hereof and as provided below) less than the Purchase Price in effect immediately
prior to the issuance of such options, rights or warrants, or such convertible
or exchangeable securities, or without consideration (including the issuance of
any such securities by way of dividend or other distribution), the Purchase
Price for the Warrants (whether or not the same shall be issued and outstanding)
in effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making the computation in accordance with the
provisions of Section 8(a)(i) hereof, provided that:
(i) The aggregate maximum number of shares of Common Stock,
as the case may be, issuable or that may become issuable under such options,
rights or warrants (assuming exercise in full even if not then currently
exercisable or currently exercisable in full) shall be deemed to be issued and
outstanding at the time such options, rights or warrants were issued, for a
consideration equal to the minimum purchase price per share provided for in such
options, rights or warrants at the time of issuance, plus the consideration, if
any, received by the Company for such options, rights or warrants; PROVIDED,
HOWEVER, that upon the expiration or other termination of such options, rights
or warrants, if any thereof shall not have been exercised, the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(i) (and for the purposes of Section 8(a)(i)(E) hereof) shall be reduced by the
number of shares as to which options, warrants and/or rights shall have expired,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Purchase Price then in effect shall forthwith be readjusted
and thereafter be the price that it would have been had adjustment been made on
the basis of the issuance only of the shares actually issued plus the shares
remaining issuable upon the exercise of those options, rights or warrants as to
which the exercise rights shall not have expired or terminated unexercised.
(ii) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; PROVIDED, HOWEVER, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or
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otherwise), the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subsection (ii) (and for the purposes of Section
8(a)(i)(E) hereof) shall be reduced by the number of shares as to which the
conversion or exchange rights shall have expired or terminated unexercised, and
such number of shares shall no longer be deemed to be issued and outstanding,
and the Purchase Price then in effect shall forthwith be readjusted and
thereafter be the price that it would have been had adjustment been made on the
basis of the issuance only of the shares actually issued plus the shares
remaining issuable upon conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall not
have expired or terminated unexercised.
(iii) If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to in Section
8(b)(i) hereof, or in the price per share or ratio at which the securities
referred to in Section 8(b)(ii) hereof are convertible or exchangeable, such
options, rights or warrants or conversion or exchange rights, as the case may
be, to the extent not theretofore exercised, shall be deemed to have expired or
terminated on the date when such price change became effective in respect of
shares not theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities.
(c) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a Subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants), or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Registered Holder of each Warrant then outstanding shall have the
right thereafter to receive on exercise of such Warrant the kind and amount of
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
securities issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and shall
forthwith file at the Corporate Office of the Warrant Agent a statement signed
by its Chairman of the Board, President or a Vice President and by its Treasurer
or an Assistant Treasurer or its
-14-
Secretary or an Assistant Secretary evidencing such provision. Such provisions
shall include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in Sections 8(a) and 8(b)
hereof. The above provisions of this Section 8(c) shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the Purchase Price per
share and the number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman of the Board, President, or a Vice President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company
setting forth: (i) the Purchase Price, as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant, after such
adjustment, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the Warrant
Agent and cause a brief summary thereof to be sent by ordinary first class mail
to each Registered Holder at his last address as it shall appear on the registry
books of the Warrant Agent. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity thereof except as to
the holder to whom the Company failed to mail such notice, or except as to the
holder whose notice was defective. The affidavit of an officer of the Warrant
Agent or the Secretary or an Assistant Secretary of the Company that such notice
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(f) No adjustment of the Purchase Price shall be made as a
result of or in connection with (i) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof, (ii) the
issuance or sale of shares of Common Stock upon the exercise of any "incentive
stock options" (as such term is defined in the Internal Revenue Code of 1986, as
amended), or any non-qualified stock options to non-employee directors of the
Company pursuant to the Company's 1995 Stock Option Plan, whether or not such
options were outstanding on the date hereof, or (C) the issuance or sale of
shares of Common Stock if the amount of said adjustment shall be less than ten
cents ($.10); PROVIDED,
-15-
HOWEVER, that in such case, any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment that shall amount, together with
any adjustment so carried forward, to at least ten cents ($. 10). In addition,
Registered Holders shall not be entitled to cash dividends paid by the Company
prior to the exercise of any Warrant or Warrants held by them.
(g) In case of any consolidation of the Company with or merger
of the Company into another corporation or other entity or in case of any sale,
lease, conveyance or other transfer to another corporation, person or other
entity of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, person or other entity, as the case may be, shall execute with the
Warrantholder, and the agreements governing such consolidation, merger, sale,
lease, conveyance or other transfer shall require such execution of, an
agreement that the Warrantholder shall have the right thereafter upon payment of
the Warrant Price in effect immediately prior to such event, upon exercise of
the Warrants, to receive the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, lease, conveyance or other
transfer had the Warrants (and each underlying security) been exercised
immediately prior to such action. The Company shall promptly mail to each
Warrantholder by first class mail, postage prepaid, notice of the execution of
any such agreement. In the event of a merger described in Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, in which the Company is the surviving
corporation, the right to purchase shares of Warrant Stock under the Warrants
shall terminate on the date of such merger and thereupon the Warrants shall
become null and void, but only if the controlling corporation shall agree to
substitute for the Warrants its warrant which entitles the holder thereof to
purchase upon its exercise the kind and amount of shares and other securities
and property which it would have owned or been entitled to receive had the
Warrants been exercised immediately prior to such merger. Any such agreements
referred to in this Section 8(g) shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
Section 8 hereof, and shall provide for terms and provisions at least as
favorable to the Warrantholder as those contained in this Agreement. The
provisions of this Section 8(g) shall similarly apply to successive
consolidations, mergers, sales, leases, conveyances or other transfers.
(h) Before taking any action which would cause an adjustment
effectively reducing the portion of the Purchase Price allocable to each share
of Warrant Stock below the then par value per share, if any, of the Warrant
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that
-16-
the Company may validly and legally issue fully paid and nonassessable Warrant
Stock upon exercise of the Warrants.
(i) The Company may retain Corbin & Wertz (or such other
accounting firm qualified to practice in front of the Securities and Exchange
Commission (the "Commission") as is reasonably acceptable to the
Representatives) to make any computation required under this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 8.
SECTION 9. REDEMPTION.
(a) Commencing on the Initial Warrant Redemption Date, the
Company may, on thirty (30) days prior written notice redeem all of the Warrants
at a redemption price of twenty five cents ($.25) per Warrant; PROVIDED,
HOWEVER, that before any such call for redemption of Warrants can take place,
(i) the average closing bid price for the Common Stock in the over-the-counter
market as reported by the Nasdaq Stock Market or (ii) the average closing sale
price on the primary exchange on which the Common Stock is traded, if the Common
Stock is traded on a national securities exchange, shall have for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth (5th) trading day prior to the date on which the notice
contemplated by SECTIONS 9(b) and 9(c) hereof is given, equalled or exceeded
Five Dollars and Sixty Cents ($5.60) per share (subject to adjustment in the
event of any stock splits or other similar events as provided in SECTION 8
hereof).
(b) In case the Company shall exercise its right to redeem all
of the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last address as shall appear
on the records of the Warrant Agent. Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice. Not less than five (5) business days
prior to the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to the
Underwriter or its successors or assigns a similar notice telephonically and
confirmed in writing, together with a list of the Registered Holders (including
their respective addresses and number of Warrants beneficially owned by them) to
whom such notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, which shall in no event be less than
thirty (30) days after the date of mailing of such notice, (iii) the place where
the Warrant Certificates shall be delivered and the redemption price that shall
be paid, (iv) that the Representatives or their successors or assigns is the
Company's exclusive warrant solicitation agent
-17-
and shall receive the commission contemplated by SECTION 4(b) hereof, and (v)
that the right to exercise the Warrant shall terminate at 5:00 p.m. (California
time) on the business day immediately preceding the date fixed for redemption.
The date fixed for the redemption of the Warrants shall be the "Redemption Date"
for purposes of this Agreement. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to a holder (A) to whom notice was not mailed or
(B) whose notice was defective. An affidavit of the Warrant Agent or the
Secretary or Assistant Secretary of the Company that notice of redemption has
been mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m.
(California time) on the business day immediately preceding the Redemption Date.
The redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) The Company shall indemnify the Representatives and each
person, if any, who controls either of the Representatives within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act or otherwise
arising out of the registration statement or prospectus referred to in Section
5(b) hereof to the same extent and with the same effect (including the
provisions regarding contribution) as the provisions pursuant to which the
Company has agreed to indemnify the Underwriters contained in SECTION 7 of the
Underwriting Agreement.
(f) Five (5) business days prior to the Redemption Date, the
Company shall furnish to the Representatives (i) an opinion of counsel to the
Company, dated such date and addressed to the Representatives, and (ii) a "cold
comfort' letter dated such date addressed to the Representatives, signed by the
independent public accountants who have issued a report on the Company's
financial statements included in the registration statement referred to in
SECTION 5(b) hereof, in each case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities, including, without limitation,
those matters covered in SECTION 6(i) of the Underwriting Agreement.
(g) The Company shall as soon as practicable after the
Redemption Date, and in any event within fifteen (15)
-18-
months thereafter, make "generally available to its security holders" (within
the meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with SECTION II(a) of the Act and covering a period of at
least twelve (12) consecutive months beginning after the Redemption Date.
(h) The Company shall deliver to the Representatives within five
(5) business days prior to the Redemption Date copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement referred to in SECTION 5(b) hereof and permit the
Representatives to do such investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the registration statement
as it deems reasonably necessary to comply with applicable securities laws or
the miles of the NASD. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as the Representatives shall reasonably
request.
SECTION 10. REGISTRATION REQUIREMENT.
(a) The Company shall be obligated to the registered holders of
the Warrants to continually maintain, at the Company's own expense, the currency
and effectiveness of a registration statement of the Company under the
Securities Act of 1933, as amended, including the filing of any and all
applications and other notifications, filings and post-effective amendments and
supplements (collectively, the "Current registration statement") and any
necessary filings under applicable state blue sky (securities) laws, as may be
necessary, so as to permit the issuance of the Common Stock underlying the
Warrants to the holder of the Warrants until the earlier of the time that all
shares of Securities have been exercised pursuant to the Current Registration
Statement or the Expiration Date.
SECTION 11. CONCERNING THE WARRANT AGENT.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and the Representatives, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder, be deemed to make any representations as to the validity or value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and non-
assessable.
-19-
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustment, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (iii) be liable
for any act or omission in connection with this Agreement except for its own
gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or the Representatives)
and shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
(d) Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of the Board of Directors, President or any Vice
President (unless other evidence in respect thereof is herein specifically
prescribed). The Warrant Agent shall not be liable for any action taken,
suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and hold it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving thirty (30) days' prior written notice to the Company. At least
fifteen (15) days prior to the date such resignation is to become effective, the
Warrant Agent shall cause a copy of such notice of resignation to be mailed to
the Registered Holder of each Warrant Certificate at the Company's expense.
Upon such resignation the
-20-
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of thirty (30) days after it has been
notified in writing of such resignation by the resigning Warrant Agent, then the
Registered Holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report to
its stockholders, of not less than ten million dollars ($10,000,000) or a stock
transfer company reasonably acceptable to the Representatives. After acceptance
in writing of such appointment by the new warrant agent is received by the
Company, such new warrant agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named herein as the
warrant agent, without any further assurance, conveyance, act or deed; but if
for any reason it shall be necessary or expedient to execute and deliver any
further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning Warrant Agent. Not later than the effective date of any such
appointment, the Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effect as though it were not Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two (2) years from
the date of exercise any Warrant Certificate received by it upon such exercise.
-21-
SECTION 12. MODIFICATION OF AGREEMENT.
The Warrant Agent and the Company may by supplemental agreement make any
changes or corrections in this Agreement (a) that they shall deem appropriate to
cure any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained, or (b) that they may deem necessary
or desirable and which shall not adversely affect the interests of the holders
of Warrant Certificates; PROVIDED, HOWEVER, that this Agreement shall not
otherwise be modified, supplemented or altered in any respect except with the
consent in writing of the Registered Holders holding not less than sixty-six and
two-thirds percent (66-2/3%) of the Warrants then outstanding; provided,
further, that no change in the number or nature of the securities purchasable
upon the exercise of any Warrant, and no change that increases the Purchase
Price of any Warrant, other than such changes as are specifically set forth in
this Agreement as originally executed, shall be made without the consent in
writing of each Registered Holders affected by such change. In addition, this
Agreement may not be modified, amended or supplemented without the prior written
consent of the Representatives or their successors or assigns, other than to
cure any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained or to make any such change that the
Warrant Agent and the Company deem necessary or desirable and which shall not
adversely affect the interests of the Representatives or its successors or
assigns.
SECTION 13. NOTICES.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been made when delivered or mailed first-
class postage prepaid or delivered to a telegraph office for transmission, if to
the Registered Holder of a Warrant Certificate, at the address of such holder as
shown on the registry books maintained by the Warrant Agent; if to the Company
at 2985 East Hillcrest Drive, Suite A, Westlake Village, California 91362,
Attention: Vincent J. Bitetti, Chief Executive Officer, or at such other address
as may have been furnished to the Warrant Agent in writing by the Company; and
if to the Warrant Agent, at its Corporate Office. Copies of any notice
delivered pursuant to this Agreement shall also be delivered to The Boston
Group, L.P., 1999 Avenue of the Stars, Suite 2550, Los Angeles, California
90067, Attention: Robert A. DiMinico, or at such other address as may have been
furnished by the Representatives to the Company and the Warrant Agent in
writing.
SECTION 14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California without giving effect to conflicts of laws.
-22-
SECTION 15. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation. The Representatives are, and
shall at all times irrevocably be deemed to be, third-party beneficiaries of
this Agreement, with full power, authority and standing to enforce the rights
granted to them hereunder.
SECTION 16. COUNTERPARTS.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
[Rest of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SOUND SOURCE INTERACTIVE, INC. CORPORATE STOCK TRANSFER COMPANY
As Warrant Agent
BY: By:
------------------------- -------------------------
Name: Eric H. Winston Name:
Title: President Title:
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EXHIBIT A
No. W VOID AFTER , 2001
----- -----------
WARRANTS
----
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK
SOUND SOURCE INTERACTIVE, INC.
CUSIP
-----------
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and non-assessable share of Common Stock, no par value,
of Sound Source Interactive, Inc., a Delaware corporation (the "Company"), at
any time from ________, 1997 and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of Corporate Stock Transfer Company, 370 17th Street, Suite 2350, Denver,
Colorado 80202, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $4.40, subject to adjustment (the "Purchase Price"),
in lawful money of the United States of America in cash or by check made payable
to the Warrant Agent for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated ___________,
1996, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute
A-1
and deliver a new Warrant Certificate or Warrant Certificates of like tenor,
which the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (California time) on
__________, 2001. If such date shall in the State of California be a holiday or
a day on which banks are authorized to close, then the Expiration Date shall
mean 5:00 p.m. (California time) the next following day which in the State of
California is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, to keep such registration statement current, if required under the
Act, while any of the Warrants are outstanding, and deliver a prospectus which
complies with Section 10(a)(3) of the Act to the Registered Holder exercising
this Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.25 per
Warrant, at any time commencing ________________, 1997, provided that (i) the
average closing bid price for the Company's Common Stock in the over-the-counter
A-2
market as reported by the Nasdaq Stock Market or (ii) the average closing sale
price on the primary exchange on which the Common Stock is traded, if the Common
Stock is traded on a national securities exchange, shall have for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth trading day prior to the Notice of Redemption, as defined below,
equalled or exceeded $5.60 per share (subject to adjustment in the event of any
stock splits or other similar events). Notice of redemption (the "Notice of
Redemption") shall be given not later than the thirtieth day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after
the date fixed for redemption, the Registered Holder shall have no rights with
respect to this Warrant except to receive the $.25 per Warrant upon surrender of
this Certificate.
Under certain circumstances, The Boston Group, L.P. or Joseph Stevens &
Company, L.P. shall be entitled to receive an aggregate of five percent of the
Purchase Price of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of California without giving effect to conflicts of
laws.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
A-3
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: 1996
SOUND SOURCE INTERACTIVE, INC.
[SEAL]
By:
------------------------------
Name: Vincent J. Bitetti
Title: Chief Executive Officer
By:
--------------------------
Name: Ulrich Gottschling
Title: Chief Financial Officer
COUNTERSIGNED:
CORPORATE STOCK TRANSFER COMPANY,
as Warrant Agent
By:
-----------------------------
Authorized Officer
A-4
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the securities
issuable upon the exercise of such Warrants, and requests that certificates for
such securities be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
-----------------------
-----------------------
-----------------------
-----------------------
(please print or type name and address)
and be delivered to
-----------------------
-----------------------
-----------------------
-----------------------
please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
A-5
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below. Unless otherwise indicated by listing the name of another NASD member
firm, it will be assumed that the exercise was solicited by The Boston Group,
L.P. of Joseph Stevens & Company, L.P.
Check below to indicate the soliciting agent:
The Boston Group, L.P.
-----
Joseph Stevens & Company, L.P.
-----
-----------------------
(Name of NASD member if
other than The Boston
Group, L.P. or Joseph
Stevens & Company, L.P.)
Dated: X
------------- ----------------------
-----------------------
-----------------------
Address
-----------------------
Social Security or Taxpayer
Identification Number
-----------------------
Signature Guaranteed
-----------------------
A-6
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ______________________, hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
-----------------------
-----------------------
-----------------------
-----------------------
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
________________________ Attorney to transfer this Warrant Certificate on the
books of the Company, with full power of substitution in the premises.
Dated: X
------------- ----------------------
-----------------------
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
A-7
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