EXHIBIT 10.61
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Electronic Integrated Solutions
Number of Shares: 96
Class of Stock: Common
Initial Exercise Price: $27.21
Issue Date: September 1, 1998
Expiration Date: August 31, 2005
THIS WARRANT CERTIFIES THAT, pursuant to the provisions of that certain
Investor Agreement dated as of June 24, 1998 and for other good and valuable
consideration set forth in Article 4 of this Warrant, Xxxxxx X. Xxxxxxx Trust
("Holder") is entitled to purchase the number of fully paid and nonassessable
shares of Common Stock (the "Shares") of the corporation (the "Company") at the
price per Share (the "Warrant Price") all as set forth above and as adjusted
pursuant to Article 2 of this Warrant, subject to the provisions and upon the
terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
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1.1. Method of Exercise. Holder may exercise this Warrant by delivering
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a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company. Unless Holder is exercising
the conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2. Conversion Right. In lieu of exercising this Warrant as specified
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in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.4.
1.3. No Rights of Shareholder. This Warrant does not entitle Holder to
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any voting rights as a shareholder of the Company prior to the exercise hereof.
1.4. Fair Market Value. If the Shares are traded in a public market,
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the fair market value of the Shares shall be the closing price of the Shares (or
the closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determined fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Xxxxxx advises
the Board of Directors in writing that Xxxxxx disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking or public accounting firm to undertake such valuation. If the valuation
of such investment banking firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Xxxxxx.
1.5. Delivery of Certificate and New Warrant. Promptly after Holder
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exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6. Replacement of Warrants. On receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft and destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7. Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant,
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"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of any
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Acquisition the successor entity shall assume the obligations of this Warrant,
and this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly.
1.7.3. Purchase Right. Notwithstanding the foregoing, at the
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election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
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ARTICLE 2. ADJUSTMENTS TO THE SHARES.
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2.1. Stock Dividends, Splits, Etc. If the Company declares or pays a
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dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend of subdivision occurred.
2.2. Reclassification, Exchange or Substitution. Upon any
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reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of a new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3. Adjustment for Combinations, Etc. If the outstanding Shares are
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combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4. Weighted Average Adjustment. If the Company issues additional
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common shares (including shares of common stock ultimately issuable upon
conversion of a security convertible into common stock) after the date of the
Warrant and the consideration per additional common share is less than the
Warrant Price in effect immediately before such issue, the Warrant Price shall
be reduced, concurrently with such Issue, to a price determined by multiplying
the Warrant Price by a fraction.
(a) the numerator of which is the amount of common stock
outstanding immediately before such Issue plus the amount of common stock that
the aggregate consideration received by the Company for the additional common
shares would purchase at the Warrant Price in effect immediately before such
Issue and
(b) the denominator of which is the amount of common
stock outstanding immediately before such issue plus the number of such
additional common shares.
Upon each adjustment of the Warrant Price, the Number of Shares issuable upon
exercise of the Warrant shall be increased to equal the quotient obtained by
dividing (a) the product resulting from multiplying (i) the number of Shares
issuable upon exercise of the Warrant and (ii) the Warrant Price, in each case
as in effect immediately before such adjustment, by (b) the adjusted Warrant
Price.
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2.5. No Impairment. The Company shall not, by amendment of its Articles
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of Incorporation or through a 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 to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of any of all the provisions of this
Article 2 and in taking all such action as may be necessary or appropriate to
product Holder's rights under this Article against impairment. If the Company
takes my action affecting the Shares or its common stock other than as described
about the adversely affects Holder's rights under this Warrant, the Warrant
Price shall be adjusted downward and the number of Shares issuable upon exercise
of this Warrant shall be adjusted upward in such a manner that the aggregate
Warrant Price of this Warrant is unchanged.
2.6. Fractional Shares. No fractional Shares shall be issuable upon
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exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7. Certificate as to Adjustments. Upon each adjustment of the Warrant
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Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
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3.1. Representations and Warranties. The Company hereby represents and
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warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws. The Company shall at all
times reserve a sufficient number of shares of common stock for issuance upon
Xxxxxx's exercise of its rights hereunder.
3.2. Notice of Certain Events. If the Company proposes at any time (a)
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to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
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Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above, (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3. Information Rights. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual financial statements of the Company.
3.3.1. Registration Under Securities Act of 1933, as amended. The
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Company hereby grants to Holder the same piggyback registration rights as are
set forth in the Registration Rights Agreement dated as of June 24, 1998 between
the Company and the Holder.
ARTICLE 4. REPRESENTATIONS AND COVENANTS OF THE HOLDER.
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4.1. Representation Re Accredited Investor Status. The Holder
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represents and warrants to the Company that (a) the information provided by the
Holder to the Company in the Investor Questionnaire submitted in June 1998 in
conjunction with the Holder's original investment in the Company was true and
accurate at that time and remains true and accurate as of the date this Warrant
is issued and (b) the Holder remains an Accredited Investor as described in
Section 2.1 of the Investor Agreement between the Company and the Holder dated
as of June 24, 1998.
4.2. Covenant of Holder to Lend Money to the Company. The Holder
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acknowledges and agrees that as part of the consideration for the grant of this
Warrant, the Holder agrees to loan to the Company the sum of EIGHT THOUSAND
SEVEN HUNDRED SEVEN DOLLARS AND TWENTY CENTS ($8,707.20) at an annual rate of
interest of TWELVE PERCENT (12%) with a maturity date of seven (7) months from
the date of the loan (the "Loan") if the Company requests that the Loan be made
within the time frame set forth in this (S).4.2. Xxxxxx agrees to provide the
Loan to the Company within thirty (30) days of receipt of a written request from
the Company to make the Loan provided that the written request is delivered to
the Holder between September 1, 1998 and the Expiration Date listed above.
ARTICLE 5. MISCELLANEOUS.
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5.1. Term. This Warrant is exercisable, in whole or in part, at any
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time and from time to time on or before the Expiration Date set forth above.
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5.2. Legends. This Warrant and the Shares (and the securities
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issuable, directly or indirectly upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
5.3. Compliance with Securities Laws on Transfer. This Warrant and the
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Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
5.4. Transfer Procedure. Subject to the provisions of Section 4.2,
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Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
5.5. Notices. All notices and other communications from the Company to
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the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
5.6. Waiver. This Warrant and any term hereof may be changed, waived,
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discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.7. Attorneys Fees. In the event of any dispute between the parties
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concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonably attorneys'
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fees.
5.8. Governing Law. This Warrant shall be governed by and construed in
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accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
ELECTRONIC INTEGRATED SOLUTIONS
By: /s/ Xxxxxx X. Xxxxxx
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Title President/CEO
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HOLDER
XXXXXX X. XXXXXXX TRUST
By: /s/ Xxxxxx Xxxxxxx
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Title______________________________
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APPENDIX 1
NOTICE OF EXERCISE
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1. The undersigned hereby elects to purchase __________ shares of the
Common Stock of ______________ pursuant to the terms of the attached Warrant,
and tenders wherewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. The conversion
is exercised with respect to _________________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below
_________________________
(Name)
_________________________
_________________________
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
___________________________
(Signature
_________________________
(Date)
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