Contract
NEITHER THIS WARRANT NOR ANY SHARES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAW, AND NEITHER THIS WARRANT NOR ANY SHARES ISSUABLE UPON CONVERSION HEREOF MAY BE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
Warrant
To Purchase Common Stock of
Southwall Technologies Inc.
1. Issuance. This Warrant, dated as of November 11, 2003, is issued to Xxxxxxx Capital Partners by Southwall Technologies Inc., a Delaware corporation (hereinafter with its successors called the "Company"). This Warrant is issued pursuant to Section 8 of that certain letter agreement dated as of November 11, 2003, by and between Xxxxxxx & Company, Inc. ("Xxxxxxx") and the Company (the "Letter Agreement").
2. Purchase Price; Number of Shares. Subject to the terms and conditions hereinafter set forth, the registered holder of this Warrant (the "Holder"), is entitled upon surrender of this Warrant with the subscription form annexed hereto duly executed, at the office of the Company, 0000 Xxxx Xxxxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or such other office in the United States as the Company shall notify the Holder of in writing, from and after December 1, 2003, and on or before the Termination Date (as defined below), to purchase from the Company 1,254,235 shares (as adjusted or increased, the "Warrant Shares") of the Company's Common Stock, $.001 par value per share ("Common Stock"), at an exercise price equal to $0.01 per share. The "Termination Date" shall mean the earlier to occur of (a) November 11, 2008, and (b) the execution and delivery by Xxxxxxx and the Company of the Definitive Agreements (as defined in the Letter Agreement).
3. Payment of Purchase Price. The aggregate purchase price payable upon any exercise of this Warrant may be paid in cash or by check or as set forth in Section 4 below.
4. Net Issuance Election. The Holder may elect to receive, without the payment by the Holder of any additional consideration, Warrant Shares equal to the value of this Warrant or any portion hereof by the surrender of this Warrant or such portion to the Company, with the net issuance election notice annexed hereto duly executed, at the office of the Company. Thereupon, the Company shall issue to the Holder such number of fully paid and nonassessable Warrant Shares as is computed using the following formula:
X = Y (A-B)
A
where X = the number of Warrant Shares to be issued to the Holder pursuant to this Section 4.
Y = the number of Warrant Shares covered by this Warrant in respect of which the net issuance election is made pursuant to this Section 4.
A = Fair Market Value (as defined below) of one Warrant Share at the time the net issuance election is made pursuant to this Section 4.
B = the purchase price per share in effect under this Warrant at the time the net issuance election is made pursuant to this Section 4.
For purposes of this Section 4, "Fair Market Value" on any day shall mean (a) the average of the closing bid and asked prices of a share of Common Stock on the trading day immediately preceding the day in question in the over-the-counter market as shown by the National Association of Securities Dealers, Inc. Automated Quotation System, or any similar system of automated dissemination of quotations and securities prices then in common use, if so quoted, as reported by any member firm of the New York Stock Exchange selected by the Company and the Holder, (b) if not quoted as describe in clause (a), the average closing bid and asked prices for a share Common Stock on the trading day immediately preceding the day in question as reported by the National Quotation Bureau Incorporated or any similar successor organization, as reported by any member firm of the New York Stock Exchange selected by the Company and the Holder, or (c) if not quoted as described in clause (a) or (b) above, the fair market value of a share of Common Stock on such date as determined by the board of directors of the Company and the Holder in good faith.
5. Partial Exercise. This Warrant may be exercised in part, and the Holder shall be entitled to receive a new warrant, which shall be dated as of the date of this Warrant, covering the number of Warrant Shares in respect of which this Warrant shall not have been exercised.
6. Issuance Date. The person or persons in whose name or names any certificate representing Warrant Shares is issued hereunder shall be deemed to have become the holders of record of such shares represented thereby as at the close of business on the date this Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed.
7. Expiration Date. This Warrant shall expire at the close of business on the Termination Date, and shall be void thereafter.
8. Reserved Shares; Valid Issuance. The Company covenants that it will reserve and keep available at all times from and after the date hereof such number of its authorized shares of Common Stock, free from all preemptive or similar rights therein, as will be sufficient to permit the exercise of this Warrant in full. The Company further covenants that such shares as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof.
9. Subdivisions, Split-ups, Combinations and Stock Dividends; Reclassifications.
(a) If after the date hereof the Company shall subdivide the Common Stock, by split up or otherwise, or combine such shares, or issue additional shares in payment of a stock dividend on such shares, the number of shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the purchase price shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination.
(b) If after the date hereof there shall be any reclassification, capital reorganization or change of the Common Stock (other than as a result of a subdivision, combination or stock dividend provided for in Section 9(a) hereof), then, as a condition of such reclassification, reorganization or change, lawful provisions shall be made, and duly executed documents evidencing the same from the Company shall be delivered to the Holder, so that the Holder shall thereafter have the right to purchase, at a total price not to exceed that payable upon the exercise of this Warrant in full, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization or change, by holders of the number of shares of Common Stock which might have been purchased by the Holder immediately prior to such reclassification, reorganization or change, and in such case appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the purchase price and the number of shares issuable hereunder) shall thereafter be applicable in relation to any shares of stock or other securities and property thereafter deliverable upon exercise hereof.
10. Adjustment upon Financing. The total number of Warrant Shares for which this Warrant shall be exercisable shall be increased by the number of shares of Common Stock equal to 10% of the number of shares of Common Stock issued in any Other Financing Transaction (as defined below). An "Other Financing Transaction" shall mean any capital raising or financing transaction consummated on or before the end of the Company's first fiscal quarter of 2004, by the Company with a party other than Xxxxxxx or an affiliate of Xxxxxxx. For purposes of calculating the number of shares issued in any Other Financing Transaction, any warrants, rights or options exercisable for Common Stock and any securities convertible or exchangeable for Common Stock that are issued in such Other Financing Transaction shall be deemed an issuance of the number of shares of Common Stock into which such warrants, rights, options or securities could be exercised, converted or exchanged as of the date of the issuance thereof.
11. Merger or Sale. If this Warrant has not been exercised prior to the closing of a "Merger or Sale", this Warrant will terminate automatically upon such closing. "Merger or Sale" shall mean one or a series of related transactions involving a sale of all or substantially all of the Company's assets, a merger of the Company with or into another entity (if after such merger or asset sale the holders of a majority of the Company's voting securities before the transaction do not constitute a majority of the voting securities of the successor entity), or a transfer of all or substantially all of the Company's voting equity securities to another person or entity.
12. Fractional Shares. In no event shall any fractional share of Common Stock be issued upon any exercise of this Warrant. If, upon exercise of this Warrant as an entirety, the Holder would, except as provided in this Section 12, be entitled to receive such a fractional share, then the Company shall issue the next higher number of full shares of Common Stock, issuing a full share with respect to such fractional share.
13. Registration Rights.
(a) Effective Date. The rights of each Holder that holds Registrable Securities under this Section 13 are effective as of the date hereof and shall remain in full force and effect for so long as the Holder continues to hold any Registrable Securities.
(b) Demand Registrations. In the event that the Company shall receive a written request any time on or after December 1, 2003 that the Company effect any Registration with respect to all or a part (but at least an aggregate of 500,000) of the Registrable Securities for an offering of all or part of the Registrable Securities, the Company shall, subject to receipt of all necessary information from the holders of such shares, as soon as practicable use commercially reasonable efforts to effect Registration of the Registrable Securities specified in such request. The Company shall not be obligated to take any action to effect any such registration pursuant to this Section 13(b) after the Company has effected two such Registrations pursuant to this Section 13(b) and such Registrations have been declared effective.
(c) Piggyback Registrations. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a registration on Form S-8 or Form S-4 or any successor forms, a registration covering only an employee benefit plan (as defined in Rule 405 of the Securities Act) or a registration covering only securities proposed to be issued in exchange for securities or assets of another corporation) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company will give prompt written notice to all holders of Registrable Securities and shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 Business Days after the day on which the Company's notice is deemed delivered under the terms hereof. Notwithstanding anything herein to the contrary, in connection with any Registration under this Section 13(c) involving an underwriting, the Company shall not be required to include any Registrable Securities in such offering unless the holders thereof accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it. If in the opinion of the managing underwriter, it is appropriate because of marketing factors to limit the number of Registrable Securities to be included in the offering pursuant to this Section 13(c), then the Company shall include in the offering only that number of Registrable Securities, if any, that the managing underwriter believes would not jeopardize the offering. The Company shall have the right to postpone or withdraw any Registration effected pursuant to this Section 13(c) without obligation to any Holder.
(d) Undertakings of the Company. The Company agrees not to effect any public sale or distribution (including sales pursuant to Rule 144 under the Securities Act) of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 90-day period beginning on the effective date of any Registration, unless the Holder agrees in writing.
(e) Registration Procedures. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Section 13, the Company will use commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition therefor, and pursuant thereto, the Company will, as expeditiously as reasonably possible, do all of the following:
(2) AMENDMENTS & SUPPLEMENTS. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof or until all shares registered thereunder have been sold, which period shall not be longer than 12 months, provided that, if the filing of any such amendment or supplement would cause the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company, in the best interests of the Company, such filing shall not be made until the Board of Directors in good faith determines;
(4) BLUE-SKY COMPLIANCE. Use commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such United States jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify for this subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction other than with respect to the registration, qualification or exemption therefrom of the Registrable Securities);
(10) OBTAIN COLD COMFORT LETTER AND OPINIONS OF COUNSEL. Obtain a cold comfort letter from the Company's independent public accountants and opinions of counsel from the Company's attorneys, each in customary form and covering such matters as are customarily given or covered by independent public accountants and attorneys, as applicable, in an underwritten public offering of securities, addressed to the sellers.
(f) Certain Events. In the event: (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of any Registration Statement for amendments or supplements to a Registration Statement or related prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; or (iv) of any event or circumstance that necessitates the making of changes in the Registration Statement or prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of a prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; then the Company shall deliver, upon a resolution of the board of directors of the Company, a certificate in writing to each seller (a "Suspension Notice") to the effect of the foregoing and detailing the facts and circumstances related to the foregoing and, upon receipt of such Suspension Notice, each seller will refrain from selling any Registrable Securities pursuant to a Registration Statement (a "Suspension") until seller's receipt of copies of a supplemented or amended prospectus prepared and filed with the SEC by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. In the even of any Suspension, the Company shall use commercially reasonable efforts to cause the use of the prospectus so suspended to be resumed as soon as reasonably practicable provided that, if such use would cause the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company, in the best interests of the Company, such Suspension shall be continued until the Board of Directors in good faith determines.
(g) Registration Expenses. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to this Section 13, including, without limitation, all registration, filing and qualification fees, printing and accounting fees, listing fees and expenses, fees and expenses of compliance with securities or blue sky laws, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling holders of Registrable Securities. Underwriting discounts and commissions relating to Registrable Securities will be borne and paid ratably by the selling holders of such Registrable Securities.
(h) Indemnification Provisions.
(i) Rule 144 Requirements. With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to: (1) use commercially reasonable efforts to make and keep public information available, as defined for purposes of Rule 144 under the Securities Act, (2) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company to be filed under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") (at any time after it has become subject to such reporting requirements, and (3) furnish to any holder of Registrable Securities, upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act (at any time after 90 days following the close of the first sale of securities by the Company pursuant to a registration statement), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as such holder may reasonable request to avail itself of any similar rule or regulation of the SEC allowing it to sell any such securities without registration.
(j) Miscellaneous.
For the purposes of this Warrant, the terms "Register", "Registered", and "Registration" refer to a registration effected by preparing and filing a registration statement on Form X-0, X-0, or S-3 in compliance with the Securities Act ("Registration Statement"), and the declaration or ordering of the effectiveness of such Registration Statement.
For the purposes of this Warrant, "Registrable Securities" shall mean all Common Stock not previously sold to the public and issued or issuable upon conversion or exercise of any of the Warrant Shares including Common Stock issued pursuant to stock splits, stock dividends, and similar distributions.
14. Certificate of Adjustment. Whenever the purchase price is adjusted, as herein provided, the Company shall promptly deliver to the Holder a certificate of the Company's Chief Financial Officer setting forth the purchase price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
15. Notices of Record Date, Etc. In the event of:
(a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right,
(b) any reclassification of the capital stock of the Company, capital reorganization of the Company, Merger or Sale, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (a) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (b) the date on which any such reclassification, reorganization, Merger or Sale or conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record in respect of such event are to be determined. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which any such action is to be taken.
16. Amendment. The terms of this Warrant may be amended, modified or waived only with the written consent of the Company and the Holder.
17. Warrant Register; Transfers, Etc.
(a) The Company will maintain a register containing the names and addresses of the registered holders of the Warrants. The Holder may change his or its address as shown on the warrant register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be given by certified mail or delivered to the Holder at his or its address as shown on the warrant register.
(b) Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Holder with respect to any or all of the Shares purchasable hereunder. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed for transfer of this Warrant as an entirety by the Holder, the Company shall issue a new warrant of the same denomination to the assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed by the Holder for transfer with respect to a portion of the Warrant Shares purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Holder hereof, and shall issue to such Holder a new warrant covering the number of shares in respect of which this Warrant shall not have been transferred.
(c) In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new warrant of like tenor and denomination and deliver the same (i) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction) and of indemnity reasonably satisfactory to the Company.
18. No Impairment. The Company will not, by amendment of its charter or by-laws or through any reclassification, capital reorganization, consolidation, merger, sale or conveyance of assets, dissolution, liquidation, 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 action as may be necessary or appropriate in order to protect the rights of the Holder.
19. Governing Law. The provisions and terms of this Warrant shall be governed by and construed in accordance with the internal laws of The State of New York.
20. Successors and Assigns. This Warrant shall be binding upon the Company's successors and assigns and shall inure to the benefit of each of the Holder's successors, legal representatives and permitted assigns.
[Signature page follows.]
Southwall Technologies Inc.
By: ______________________________
Name:
Title:
Agreed to and accepted by:
xxxxxxx capital partners
By: ______________________________
Name:
Title:
Subscription
Date:___________
The undersigned hereby subscribes for:
_______ shares of Common Stock covered by this Warrant.
The certificate(s) for such shares shall be issued in the name of the undersigned or as otherwise indicated below:
_______________________________
Signature
_______________________________
Name for Registration
_______________________________
Mailing Address
Net Issuance Election Notice
Date:___________
The undersigned hereby elects under Section 4 to surrender the right to purchase:
______ shares of Common Stock covered by this Warrant.
The certificate(s) for the shares issuable upon such net issuance election shall be issued in the name of the undersigned or as otherwise indicated below:
_______________________________
Signature
_______________________________
Name for Registration
_______________________________
Mailing Address
Assignment
For value received _______________hereby sells, assigns and transfers unto
(Please print or typewrite name and address of Assignee above)
the within Warrant, and does hereby irrevocably constitute and appoint ________________ its attorney to transfer the within Warrant on the books of the within named Company with full power of substitution in the premises.
Dated:__________
_______________________________
In the Presence of:
_____________________________