Exhibit 10.2
THE SECURITIES REPRESENTED BY THIS DOCUMENT HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 1933 ACT), AND ARE RESTRICTED SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY THROUGH REASONABLE MEANS AS DETERMINED BY THE COMPANY, INCLUDING AN OPINION OF SELLERS COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY.
INFOSONICS CORPORATION
COMMON STOCK PURCHASE WARRANT
InfoSonics Corporation, a Maryland corporation (the Company) hereby certifies that, for value received, (the Holder) is entitled to the right and warrant (the Warrant) to purchase all or any part of an aggregate of shares(1) of the authorized and unissued Common Stock of the Company (the Warrant Shares) subject to adjustment as provided in this Agreement, pursuant to the terms and conditions set forth in this Agreement. Capitalized terms not defined herein shall have the meanings given them in that certain Securities Purchase Agreement dated as of January 30, 2006 by and between the Holder and the Company (the Securities Purchase Agreement).
1. Warrant Price. At any time when shares are to be purchased pursuant to this Agreement, the exercise price for each Warrant Share shall be equal to $18.38 (the Warrant Price), subject to adjustment as provided in this Agreement.
2. Exercise Period. The period for the exercise of the Warrant (the Exercise Period) shall commence on August 2, 2006 and shall terminate at 5:00 p.m., Denver, Colorado time on February 2, 2010, unless terminated earlier as provided herein.
3. Exercise of Warrant.
(a) The Warrant may be exercised in whole or in part by delivering to the President of the Company at the address of the Companys principal office a Notice and Agreement of Exercise of Warrant, substantially in the form attached hereto as Exhibit A, specifying the number of Warrant Shares with respect to which the Warrant is exercised, and either:
(i) full payment of an amount equal to the Warrant Price multiplied by the number of Warrant Shares then being purchased (such aggregate amount of money, the Purchase Price). Payment shall be made by cleared funds. The Warrant may not be exercised in part unless the purchase price for the Warrant Shares purchased is at least $1,000 or unless the entire remaining portion of the Warrant is being exercised; or
(1) 30% warrant coverage.
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X = Y (A-B)
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Where: |
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X |
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the number of shares of Common Stock to be issued to the Holder |
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Y |
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the number of shares of Common Stock purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being canceled (at the date of such calculation) |
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the average VWAP per share for the five Trading Days immediately preceding the date of such election; and |
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the Exercise Price (as adjusted to the date of such calculation) |
For purposes of this Section 3(a) and Section 9(b), VWAP means, for the Common Stock for any date or period of days, the dollar volume-weighted average price for such security on the American Stock Exchange (the AMEX), during the AMEX official trading period for each such day, as reported by Bloomberg Financial Markets (Bloomberg) through its Volume at Price functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the official trading period for the electronic bulletin board for each such day, as reported by Bloomberg, or if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the pink sheets by Pink Sheets LLC. If the VWAP cannot be calculated for a security on a particular date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as determined by the Company in good faith. All such determinations shall be appropriately adjusted for any share dividend, share split, share combination or other similar transaction during the applicable calculation period.
For any period of time, the average VWAP of a security shall be calculated by (i) multiplying the price of each trade during that period by the number of shares traded in that trade, (ii) adding together the totals for each such trade, and (iii) dividing the sum of all these totals by the aggregate number of shares traded in all the trades.
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(b) Promptly upon receipt of the Notice and Agreement of Exercise of Warrant together with the full payment of the Purchase Price or pursuant to a cashless exercise described in 4(a) above, the Company shall (i) deliver to the Holder a properly executed certificate or certificates representing the Warrant Shares being purchased; or (ii) upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. Upon surrender of this Warrant following one or more partial exercises, the Company shall issue, or cause to be issued, at its expense, a new warrant certificate evidencing the right of Holder to purchase the remaining number of Warrants.
5. Withholding Taxes. The Company may take such steps as it deems necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation or any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with the Warrant including, but not limited to, the withholding of all or any portion of any payment owed by the Company to the Holder or the withholding of issuance of Warrant Shares to be issued upon the exercise of the Warrant.
6. Securities Laws Requirements. The issuance of the Warrant has not been registered under the Securities Act of 1933, as amended (the 1933 Act), in reliance upon an exemption from registration.
7. Restrictions on Transfer. There are substantial restrictions on the transferability of the Warrant and the Warrant Shares. The Warrant is not transferable except to (a) direct members of Holders immediate family; or (b) a trust or other entity owned or controlled by, or for the benefit of, only Holder and/or members of Holders immediate family. The Warrant Shares cannot otherwise be
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transferred, pledged, hypothecated, sold or otherwise disposed of unless they are registered under the 1933 Act or an exemption from such registration is available and established to the satisfaction of the Company; except as set forth in the Securities Purchase Agreement, investors in the Company have no rights to require that the Warrant Shares be registered; there is no right of presentment of the Warrant Shares and there is no obligation by the Company to repurchase any of the Warrant Shares; and, accordingly, Holder may have to hold the Warrant Shares indefinitely and it may not be possible for Holder to liquidate Holders investment in the Company. Each certificate issued representing the Warrant Shares shall be imprinted with a legend that sets forth a description of the restrictions on transferability of those securities, which legend will read substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 1933 ACT), AND ARE RESTRICTED SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY THROUGH REASONABLE MEANS AS DETERMINED BY THE COMPANY, INCLUDING AN OPINION OF SELLERS COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY.
Except as provided in the Securities Purchase Agreement, the restrictions described above, or notice thereof, may be placed on the certificates representing the Warrant Shares purchased pursuant to the Warrant, and the Company may refuse to issue the certificates or to transfer the shares on its books unless it is satisfied that no violation of such restrictions will occur.
8. Redemption by Company.
(a) Right of Redemption. Notwithstanding any other provision of this Agreement, the Company may repurchase, out of any funds legally available therefor, any Warrants during the Exercise Period that have not been exercised by Holder in the event that the closing market price of the Companys common stock as reported by Bloomberg equals or exceeds 150 percent of the Warrant Price for any 20 out of 30 consecutive trading days.
(b) Redemption Price. The redemption price per Warrant to be paid by the Company to the Holder pursuant to Section 8(a) above shall be $0.2 (the Redemption Price).
(c) Mechanics of Redemption. At least 30 but no more than 60 days prior to the date fixed by the Company for any redemption of Warrants (the Redemption Closing Date), written notice shall be mailed by the Company, postage prepaid, to each Holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Warrants to be redeemed, at the address last shown on the records of the Company for such Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying such Holder of the redemption to be
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effected, specifying the subsection hereof under which such redemption is being effected, the Redemption Closing Date, the Redemption Price, the number of such Holders Warrants to be redeemed, the place at which payment may be obtained and the date on which such Holders Exercise Period (as set forth in Section 2) as to such Warrants terminate (which date shall in no event be earlier than three (3) days prior to the Redemption Closing Date) and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the certificate or certificates representing the Warrants to be redeemed (the Redemption Notice). The Holder may exercise any portion of this Warrant at any time following receipt of a Redemption Notice and prior to the Redemption Closing Date.
(f) Other Conditions of Redemption. Notwithstanding the foregoing, the Company shall not have the right to redeem the Warrants pursuant to this Section 8 unless the following conditions are met:
(i) there is an effective registration statement on file with the Securities Exchange Commission registering the sale or other transfer of the Warrant Shares by Holder that is available for use by Holder; and
(ii) the Warrant Shares have been approved for listing on AMEX.
9. Adjustments
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10. Common Stock to be Received upon Exercise. Holder understands that (a) the Company is under no obligation to register the issuance of the Warrant Shares, (b) the Companys obligation to register the resale of the Warrant Shares under the 1933 Act is as set forth in Section 6 of the Securities Purchase Agreement, and (c) in the absence of any such registration, the Warrant Shares cannot be sold unless they are sold pursuant to an exemption from registration under the 1933 Act. Holder also understands that with respect to Rule 144, routine sales of securities made in reliance upon such Rule can be made only in limited amounts in accordance with the terms and conditions of the Rule, and that in cases in which the Rule is inapplicable, compliance with either Regulation A or another exemption under the 1933 Act will be required. Thus, the Warrant Shares will have to be held indefinitely in the absence of registration under the 1933 Act or an exemption from registration.
11. Privilege of Ownership. Holder shall not have any of the rights of a stockholder with respect to the shares covered by the Warrant except to the extent that one or more certificates for such shares shall be delivered to him or her upon exercise of the Warrant.
12. Notices. All notices, requests, demands, directions and other communications (Notices) concerning this Agreement shall be in writing and shall be mailed or delivered personally or sent by telecopier or facsimile to the applicable party at the address of such party set forth below in this Section 12. When mailed, each such Notice shall be sent by first class, certified mail, return receipt requested, enclosed in a postage prepaid wrapper, and shall be effective on the fifth business day after it has been deposited in the mail. When delivered personally, each such Notice shall be effective when delivered to the address for the respective party set forth in this Section 12, provided that it is delivered on a business day and further provided that it is delivered prior to 5:00 p.m., local time of the party to whom the Notice is being delivered, on that business day; otherwise, each such Notice shall be effective on the first business day occurring after the Notice is delivered. When sent by telecopier or facsimile, each such Notice shall be effective on the day on which it is sent provided that it is sent on a business day and further provided that it is sent prior to 5:00 p.m., local time of the party to whom the Notice is being sent, on that business day; otherwise, each such Notice shall be effective on the first business day occurring after the Notice is sent. Each such Notice shall be addressed to the party to be notified as shown below:
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if to the Company: |
InfoSonics Corporation |
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5880 Pacific Center Drive |
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San Diego, CA 92121 |
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Facsimile: (858) 373-1503 |
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Attention: Jeffrey Klausner |
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if to the Holder: |
At the address set forth on the Securities Purchase Agreement |
Either party may change its respective address for purposes of this Section 12 by giving the other party Notice of the new address in the manner set forth above; however the address set forth on the signature page to the Securities Purchase Agreement is Holders true and correct residence
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13. General Provisions. This instrument (a) may not be amended nor may any rights hereunder be waived except by an instrument in writing signed by the party sought to be charged with such amendment or waiver, (b) shall be construed in accordance with and governed by the laws of New York, with non-exclusive jurisdictions in the U.S. federal and New York and California state courts sitting in the Cities of New York, New York, and of San Diego, California, respectively, and (c) shall be binding upon and shall inure to the benefit of the parties and their respective personal representatives and assigns, except as above set forth. All pronouns contained herein and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural as the identity of the parties hereto may require.
IN WITNESS WHEREOF, this Agreement is effective on the date set forth above.
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INFOSONICS CORPORATION |
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By: |
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Name: Joseph Ram |
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Title : President and Chief Executive Officer |
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EXHIBIT A
(To InfoSonics Corporation
Common Stock Purchase Warrant)
INFOSONICS CORPORATION
NOTICE
AND AGREEMENT OF EXERCISE OF COMMON STOCK
PURCHASE WARRANT
The undersigned hereby exercises its InfoSonics Common Stock Purchase Warrant dated as of February 1, 2006 as to shares of the $.001 par value common stock (the Warrant Shares) of InfoSonics Corporation (the Company) at a purchase price of $18.38 per share.
o Enclosed is payment of the total exercise price for these Warrant Shares of $ .
o The undersigned hereby elects to purchase shares of Common Stock of the Company pursuant to the terms of the cashless exercise provisions set forth in Section 4(a)(ii) of the attached Warrant and shall tender payment of all applicable transfer taxes, if any.
(a) Following this exercise, the Warrant shall be exercisable to purchase a total of Warrant Shares.
(b) Notwithstanding anything to the contrary contained herein, this Notice shall constitute a representation by Holder that, after giving effect to the exercise provided for in this Notice, the Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Persons affiliates) of a number of shares of Common Stock which exceeds the Maximum Percentage of the total outstanding shares of Common Stock as determined pursuant to the provisions of Section 4 of the Warrant.
(c) All documents, records books and other information pertaining to an investment in the Warrant Shares that have been required by the Holder have been made available or delivered to Holder.
Warrant Shares in the amount specified above are to be issued in the name or names set forth below.
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