EXHIBIT 10.29
WARRANT TO PURCHASE COMMON STOCK
(CONVERSION WARRANTS)
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED NEITHER THE WARRANT NOR THE SHARES MAY
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 COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED. THIS WARRANT MUST BE SURRENDERED TO THE
COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE
OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT OR THE SHARES ISSUABLE
HEREUNDER.
Issuer: PayStar Corporation
Class of Stock: Common Stock
Issue Date: October 30, 2002
Expiration Date: October 30, 2005
THIS WARRANT TO PURCHASE COMMON STOCK is being issued pursuant to that
certain Securities Purchase Agreement dated as of the date hereof (the
"Purchase Agreement") between PayStar Corporation, a Nevada corporation
(the "Company") and La Jolla Cove Investors, Inc. ("Holder").
The Company hereby grants to Holder the right to purchase that number
of shares of the Company's Common Stock (the "Shares" or "Warrant Shares")
equal to ten (10) times the number of shares of Common Stock issued to
Holder from time to time pursuant to the conversion of the Debenture (as
such term is defined in the Purchase Agreement). For avoidance of doubt,
this Warrant may be exercised concurrently with or subsequent to the
issuance of a Conversion Notice under the Debenture. The date that the
Holder issues a Conversion Notice is hereafter referred to as the
"Conversion Date." Defined terms not defined herein shall have the
meanings ascribed to them in the Debenture or the Purchase Agreement.
This Warrant shall expire and Holder shall no longer be able to
purchase the Warrant Shares on October 30, 2005.
ARTICLE 1
EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by
delivering a duly executed Warrant Notice of Exercise in substantially the
form attached
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as Appendix 1 to the principal office of the Company, along with a check
payable to the Company for the aggregate Exercise Price for the Shares
being purchased.
1.2 Delivery of Certificate and New Warrant. As promptly as
practicable after the receipt of the Warrant Notice of Exercise, but in any
event not more than three (3) Business Days after the Company's receipt of
the Warrant Notice of Exercise, the Company shall issue the Shares and
cause to be mailed for delivery by overnight courier, or if a Registration
Statement covering the Shares has been declared effective by the SEC cause
to be electronically transferred, to Holder a certificate representing the
Shares acquired and, if this Warrant has not been fully exercised and has
not expired, a new Warrant substantially in the form of this Warrant
representing the right to acquire the portion of the Shares not so
acquired.
1.3 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant and, in the case of loss, theft or 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.
1.4 Exercise Price. The Exercise Price of this Warrant shall be
the lesser of (a) $0.50; or (b) eighty percent (80%) of the average of the
three lowest Market Prices during the twenty (20) Trading Days prior to
Holder's election to exercise ("Discount Multiplier"), provided, that in
the event that the Registration Statement has not been declared effective
by the SEC by the Deadline, then the Discount Multiplier shall decrease by
three percent (3%) for each month or partial month occurring after the
Deadline that the Registration Statement has not been declared effective by
the SEC; or (c) the price paid to convert the corresponding portion of the
Debenture.
ARTICLE 2
ADJUSTMENT TO THE SHARES
The number of Shares purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment form time to time upon
the occurrence of certain events, as follows:
2.1 Reclassification. In case of any reclassification or change
of outstanding securities of the class issuable upon exercise of this
Warrant then, and in any such case, the Holder, upon the exercise hereof at
any time after the consummation of such reclassification or change, shall
be entitled to receive in lieu of each Share theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and/or property received upon such reclassification or
change by a holder of one Share. The provisions of this Section 2.1 shall
similarly apply to successive reclassifications or changes.
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2.2 Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide
or combine its Shares, the Exercise Price shall be proportionately
decreased in the case of a subdivision or increased in the case of a
combination.
2.3 Stock Dividends. If the Company, at any time while this
Warrant is outstanding shall pay a dividend with respect to its Shares
payable in Shares, or make any other distribution of Shares with respect to
Shares (except any distribution specifically provided for in Section 2.1
and Section 2.2 above), then the Exercise Price shall be adjusted,
effective from and after the date of determination of shareholders entitled
to received such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such date of
determination by a fraction, (a) the numerator of which shall be the total
number of Shares outstanding immediately prior to such dividend or
distribution, and (b) the denominator of which shall be the total number of
Shares outstanding immediately after such dividend or distribution.
2.4 Non-Cash Dividends. If the Company at any time while this
Warrant is outstanding shall pay a dividend with respect to Shares payable
in securities other than Shares or other non-cash property, or make any
other distribution of such securities or property with respect to Shares
(except any distribution specifically provided for in Section 2.1 and
Section 2.2 above), then this Warrant shall represent the right to acquire
upon exercise of this Warrant such securities or property which a holder of
Shares would have been entitled to receive upon such dividend or
distribution, without the payment by the Holder of any additional
consideration for such securities or property.
2.5 Effect of Reorganization and Asset Sales. If any
(i) reorganization or reclassification of the Common Stock (ii) consolidation
or merger of the Company with or into another corporation, or (iii) sale or
all or substantially all of the Company's operating assets to another
corporation followed by a liquidation of the Company (any such transaction
shall be followed by a liquidation of the Company (any such transaction
shall be referred to herein as an "Event", is effected in such a way that
holders of common Stock are of Common Stock are entitled to receive
securities and/or assets as a result of their Common Stock ownership, the
Holder, upon exercise of this Warrant, shall be entitled to receive such
shares of stock securities or assets which the Holder would have received
had it fully exercised this Warrant on or prior the record date for such
Event. The Company shall not merge into or consolidate with another
corporation or sell all of its assets to another corporation for a
consideration consisting primarily of securities or such corporation,
unless the successor or acquiring corporation, as the case may be, shall
expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed or
observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide
for adjustments which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 2. The foregoing provisions shall
similarly apply to successive mergers, consolidations or sales of assets.
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2.6 Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price, the number of Shares shall be adjusted, to the nearest
whole share, to the product obtained by multiplying the number of Shares,
purchasable immediately prior to such adjustment and the denominator of
which shall be the Exercise Price immediately thereafter.
2.7 No Impairment. The Company shall not, by amendment of its
articles 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 all of the provisions of this Warrant and in taking all such
action as may be reasonably necessary or appropriate to protect Xxxxxx's
rights hereunder against impairment. If the Company takes any action
affecting its Common Stock other than as described above that adversely
affects Holder's rights under this Warrant, the Exercise 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
Exercise Price of this Warrant is unchanged.
2.8 Fractional Shares. No fractional Shares shall be issuable
upon the exercise of this Warrant, and the number of Shares to be issued
shall be rounded down to the nearest whole Share.
2.9 Certificate as to Adjustments. Upon any adjustment of the
Exercise Price, the Company, at its expense, shall 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 Exercise Price in effect upon the date
thereof and the series of adjustments leading to such Exercise Price.
2.10 No Rights of Shareholders. This Warrant does not entitle
Holder to any voting rights or any other rights as a shareholder of the
Company prior to the exercise of Xxxxxx's right to purchase Shares as
provided herein.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby
represents and warrants to Holder that all Shares which may be issued upon
the exercise of the purchase right represented by this Warrant, shall, upon
issuance, be duly authorized, validly issued, fully paid and nonasessable,
and free of any liens and encumbrances.
3.2 Notice of Certain Events. If the company proposes at any
time (a) 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 fights; (c) to effect any reclassification or
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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 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 Holder holds this Warrant
and/or any of the Shares, the company shall deliver to Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days of their
availability, the annual audited financial statements of the Company
certified by independent public accountants of recognized standing, and
(c) within forty-five (45) days after the end of each fiscal quarter or
each fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Reservation of Warrant Shares. The Company has reserved and
will keep available, out of the authorized and unissued shares of Common
Stock, the full number of shares sufficient to provide for the exercise of
the rights of purchase represented by this Warrant.
3.5 Registration Rights. If Holder exercises this Warrant and
purchases some or all of the Shares, Holder shall have the Registration
Rights set forth in that certain Registration Rights Agreement executed
concurrently therewith.
ARTICLE 4
REPRESENTATIONS AND COVENANTS OF THE HOLDER
4.1 Investment Purpose. Xxxxxx's right to acquire Shares is
being acquired for investment and not with a view to the sale or
distribution of any part thereof, and Holder has no present intention of
selling or engaging in any public distribution of the same except pursuant
to a registration or exemption.
4.2 Private Issue. Holder understands (i) that the Shares
issuable upon exercise of Xxxxxx's rights contained in the Warrant are not
registered under the Act or qualified under applicable state securities
laws on the ground that the issuance contemplated by the Warrant will be
exempt from the registration and qualifications requirements thereof, and
(ii) that the Company's reliance on such exemption is predicated on
Holder's representations set forth in this Article 4.
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4.3 Financial Risk. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of its investment and has the ability to bear the economic risks
of its investment.
4.4 Risk of No Registration. Holder understands that if the
Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the Act, or file reports pursuant to Section
15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the Act is not in
effect when it desires to sell (i) the right to purchase Shares pursuant to
the Warrant, or (ii) the Shares issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite
period.
4.5 Accredited Investor. Holder is an "accredited investor," as
such term is defined in Regulation D promulgated pursuant to the Act.
ARTICLE 5
MISCELLANEOUS
5.1 Term. This Warrant is exercisable, in whole or in part, at
any time and from time to time on or after the Conversion Date and on or
before the Expiration Date set forth above.
5.2 Compliance with Securities Laws on Transfer. This Warrant
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) and without the prior
written consent of Company, which consent shall not be unreasonably
withheld, provided that Holder shall have the right without the consent of
the Company to transfer or assign in whole or in part this Warrant and the
Shares issuable upon exercise this Warrant to any of Holder's affiliates,
successors, assigns or the United States Federal Reserve Board. The
Company shall not require Holder to provide an opinion of counsel if the
transfer is to an affiliate of Holder.
5.3 Transfer Procedure. Xxxxxx agrees that unless there is in
effect a registration statement under the Act covering the proposed
transfer of all or part of this Warrant, prior to any such proposed
transfer the Holder shall give written notice thereof to the Company (a
"Transfer Notice"). Each Transfer Notice shall describe the manner and
circumstances of the proposed transfer in reasonable detail and, if the
company so requests, shall be accompanied by an opinion of legal counsel,
in a form reasonably satisfactory to the Company, to the effect that the
proposed transfer may be effected without registration under the Act;
provided that the Company will not require opinions of counsel for
transactions involving transfers to affiliates or pursuant to Rule 144
promulgated by the Securities and Exchange Commission under the act, except
in unusual circumstances.
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5.4 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be delivered
personally, or sent by telecopier machine or by a nationally recognized
overnight courier service, and shall be deemed given when so delivered
personally, or by telecopier machine or overnight courier service as
follows:
if to the Company, to:
PayStar Corporation
0000 X. Xxxxxxxxx Xxxx, Xxxxx 00
Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
if to the Holder, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
or at such other address as the Company shall have furnished to the Holder.
Each such notice or other communication shall for all purposes of this
agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
five days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed
as aforesaid.
5.5 Counterparts. This agreement may be executed in any number
of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument. Facsimile execution shall be deemed originals.
5.6 Waiver. This Warrant and any term hereof may be changed,
waived, 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 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 reasonable attorneys
fees.
5.8 Governing Law; Jurisdiction. This Warrant shall be governed
by and construed in accordance with the laws of the State of California,
without giving effect to its principles regarding conflicts of law. Each of
the parties hereto consents to
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the jurisdiction of the federal courts whose districts encompass any part of
the City of San Diego or the state courts of the State of California sitting
in the City of San Diego in connection with any dispute arising under this
Warrant and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant
to Purchase Common Stock to be executed and delivered on the date first
above written.
PayStar Corporation La Jolla Cove Investors, Inc.
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxxxx Xxxx
Title: /s/ CEO Title: /s/ Portfolio Mgr.
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APPENDIX 1
WARRANT NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _____ shares of the
Common Stock of PayStar Corporation pursuant to the terms of the Warrant to
Purchase Common Stock issued by PayStar Corporation on October ___, 2002
and tenders herewith payment of the purchase price of such shares in full.
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 and Address)
3. The undersigned makes the representations and covenants set forth
in Article 4 of the Warrant to Purchase Common Stock.
___________________________
(Signature)
___________________________
(Date)
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