EXHIBIT 10.4
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
SERIES B COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
ON2 Technologies, Inc.
THIS SERIES B COMMON STOCK PURCHASE WARRANT (the "Warrant")
certifies that, for value received, _____________ (the "Holder"), is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the "Initial
Exercise Date") and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the "Termination Date") but not
thereafter, to subscribe for and purchase from ON2 Technologies, Inc., a
Delaware corporation (the "Company"), up to ______ shares (the "Warrant Shares")
of Common Stock, par value $0.01 per share, of the Company (the "Common Stock").
The purchase price of one share of Common Stock under this Warrant shall be
equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the "Purchase Agreement"), dated October __, 2004, among the Company
and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by
this Warrant may be made at any time or times on or after the Initial Exercise
Date and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice in writing
to the registered Holder at the address of such Holder appearing on the books of
the Company); provided, however, within 5 Trading Days of the date said Notice
of Exercise is delivered to the Company, the Holder shall have surrendered this
Warrant to the Company and the Company shall have received payment of the
aggregate Exercise Price of the shares thereby purchased by wire transfer or
cashier's check drawn on a United States bank.
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b) Exercise Price. The exercise price of the Common Stock under this
Warrant shall be $0.76, subject to adjustment hereunder (the "Exercise Price").
c) Cashless Exercise. If at any time after one year from the date of
issuance of this Warrant there is no effective Registration Statement
registering the resale of the Warrant Shares by the Holder, then this Warrant
may also be exercised at such time by means of a "cashless exercise" in which
the Holder shall be entitled to receive a certificate for the number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date
of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means
of a cash exercise rather than a cashless exercise.
d) Exercise Limitations.
i. Holder's Restrictions. The Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to
the extent that after giving effect to such issuance after exercise, the Holder
(together with the Holder's affiliates), as set forth on the applicable Notice
of Exercise, would beneficially own in excess of 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to such
issuance. For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by the Holder or any of its affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Preferred Stock or Warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained
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herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 2(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act, it being acknowledged by Holder that the Company is not representing to
Holder that such calculation is in compliance with Section 13(d) of the Exchange
Act and Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder) and of which a portion of
this Warrant is exercisable shall be in the sole discretion of such Xxxxxx, and
the submission of a Notice of Exercise shall be deemed to be such Holder's
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which portion of this Warrant is
exercisable, in each case subject to such aggregate percentage limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 2(d), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company's most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company's Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The provisions of this Section
2(d) may be waived by the Holder upon, at the election of the Holder, not less
than 61 days' prior notice to the Company, and the provisions of this Section
2(d) shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of waiver).
ii. Trading Market Restrictions. If the Company has not obtained
Shareholder Approval (as defined below) if required, then the Company may not
issue upon exercise of this Warrant in the aggregate, in excess of 19.999% of
the number of shares of Common Stock outstanding on the Trading Day immediately
preceding the Closing Date, less any shares of Common Stock issued upon
conversion of or as payment of dividends on the Preferred Stock or upon prior
exercise of this or any other Warrant issued pursuant to the Purchase Agreement
(such number of shares, the "Issuable Maximum"). If on any attempted exercise of
this Warrant, the issuance of Warrant Shares would exceed the Issuable Maximum
and the Company shall not have previously obtained the vote of shareholders (the
"Shareholder Approval"), if any, as may be required by the applicable rules and
regulations of the Trading Market (or any successor entity) to approve the
issuance of shares of Common Stock in excess of the Issuable Maximum pursuant to
the terms hereof, then the Company shall issue to the Holder requesting a
Warrant exercise such number of Warrant Shares as may be issued below the
Issuable Maximum and, with respect to the remainder of the aggregate number of
Warrant Shares, this Warrant shall not be exercisable until and unless
Shareholder Approval has been obtained.
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e) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase rights
represented by this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue). The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.
ii. Delivery of Certificates Upon Exercise. Certificates for shares
purchased hereunder shall be transmitted by the transfer agent of the Company to
the Holder by crediting the account of the Holder's prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent Commission
("DWAC") system if the Company is a participant in such system, and otherwise by
physical delivery to the address specified by the Holder in the Notice of
Exercise within 3 Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant and payment of the aggregate Exercise
Price as set forth above ("Warrant Share Delivery Date"). This Warrant shall be
deemed to have been exercised on the date the Exercise Price is received by the
Company. The Warrant Shares shall be deemed to have been issued, and Holder or
any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by delivery to the Company of the Notice of Exercise
Form and by payment to the Company of the Exercise Price and all taxes required
to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the
issuance of such shares, have been paid.
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iii. Delivery of New Warrants Upon Exercise. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant.
iv. Rescission Rights. If the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such exercise.
v. Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Company. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required pursuant to the
terms hereof.
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vi. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
vii. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
viii. Closing of Books. The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant), (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted. Any adjustment made pursuant to
this Section 3(a) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
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b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall offer, sell,
grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Exercise Price (such lower price,
the "Base Share Price" and such issuances collectively, a "Dilutive Issuance"),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price),
then, the Exercise Price shall be reduced by multiplying the Exercise Price by a
fraction, the numerator of which is the number of shares of Common Stock issued
and outstanding immediately prior to the Dilutive Issuance plus the number of
shares of Common Stock which the offering price for such Dilutive Issuance would
purchase at the then Exercise Price, and the denominator of which shall be the
sum of the number of shares of Common Stock issued and outstanding immediately
prior to the Dilutive Issuance plus the number of shares of Common Stock so
issued or issuable in connection with the Dilutive Issuance, the number of
Warrant Shares issuable hereunder shall be increased such that the aggregate
Exercise Price payable hereunder, after taking into account the decrease in the
Exercise Price, shall be equal to the aggregate Exercise Price prior to such
adjustment. Such adjustments shall be made whenever such Common Stock or Common
Stock Equivalents are issued. The Company shall notify the Holder in writing, no
later than the Trading Day following the issuance of any Common Stock or Common
Stock Equivalents subject to this section, indicating therein the applicable
issuance price, or of applicable reset price, exchange price, conversion price
and other pricing terms (such notice the "Dilutive Issuance Notice"). For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price in
the Notice of Exercise.
c) Pro Rata Distributions. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security other than the Common Stock
(which shall be subject to Section 3(b)), then in each such case the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then per share fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
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d) Calculations. All calculations under this Section 3 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be. The
number of shares of Common Stock outstanding at any given time shall not
includes shares of Common Stock owned or held by or for the account of the
Company, and the description of any such shares of Common Stock shall be
considered on issue or sale of Common Stock. For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
e) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to this Section 3, the Company shall promptly mail to each
Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. If the
Company issues a variable rate security, despite the prohibition thereon in the
Purchase Agreement, the Company shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion or exercise price at
which such securities may be converted or exercised in the case of a Variable
Rate Transaction (as defined in the Purchase Agreement), or the lowest possible
adjustment price in the case of an MFN Transaction (as defined in the Purchase
Agreement.
ii. Notice to Allow Exercise by Xxxxxx. If (A) the Company shall
declare a dividend (or any other distribution) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock; (C) the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last addresses as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the 20-day period commencing the date
of such notice to the effective date of the event triggering such notice.
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f) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then, upon any subsequent conversion of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise absent such Fundamental Transaction,
at the option of the Holder, (a) upon exercise of this Warrant, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Alternate Consideration
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event or (b) cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes option pricing formula (the "Alternate Consideration").
For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder's right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (f) and
insuring that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
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g) Exempt Issuance. Notwithstanding the foregoing, no adjustments,
Alternate Consideration nor notices shall be made, paid or issued under this
Section 3 in respect of an Exempt Issuance.
h) Voluntary Adjustment By Company. The Company may at any time during the
term of this Warrant reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities
laws and the conditions set forth in Sections 5(a) and 4(d) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
c) Warrant Register. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the "Warrant Register"), in
the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
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d) Transfer Restrictions. If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a) under the Securities Act.
Section 5. Miscellaneous.
a) Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
c) Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
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e) Authorized Shares.
The Company covenants that during the period the Warrant is outstanding,
it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.
Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
g) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.
h) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Xxxxxx's rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
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i) Notices. Any notice, request or other document required or permitted to
be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
j) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
k) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
l) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
m) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
n) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
o) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: October __, 2004
ON2 TECHNOLOGIES, INC.
By:_____________________________________
Name:
Title:
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NOTICE OF EXERCISE
To: ON2 Technologies, Inc.
(1)The undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.
(2)Payment shall take the form of (check applicable box):
|_| in lawful money of the United States; or
|_| the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).
(3)Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:
---------------------------
The Warrant Shares shall be delivered to the following:
---------------------------
---------------------------
---------------------------
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
_______________________________________________ whose address is
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address:_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
