EXHIBIT 10.5
Q MATRIX, INC.
_____________________________
WARRANT TO PURCHASE COMMON STOCK
______________________________
THIS WARRANT AND THE SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT
AND SUCH LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
AND SUCH LAWS.
WARRANT TO PURCHASE COMMON STOCKOF Q MATRIX, INC.
This certifies that, for good and valuable consideration, Q Matrix, Inc.
a Delaware corporation (the "Company"), grants to ______________ (the
"Warrantholder"), the right to subscribe for and purchase shares of the
Company's Common Stock ("Common Stock") in an aggregate amount equal to one
hundred and fifty percent (150%) of the number of shares of Common Stock into
which the 10% Convertible Promissory Note (the "Note") held by Warrantholder
and issued together with this Warrant becomes convertible (whether or not the
Holder elects to convert the Note into Common Stock). The exercise price for
acquisition of the Common Stock under this Warrant (the "Exercise Price")
shall be equal to the price per share in the PIPE ("Private Investment in a
Public Entity") offering. If the PIPE offering is sold as units consisting of
shares of Common Stock and warrants to purchase Common Stock, the unit
purchase price shall be allocated to the shares of common stock and warrants
as described in the offering documents for the PIPE offering, or as determined
by the Board of Directors if the allocation of the unit price is not described
in the offering documents.
After issuance of the Common Stock by the Company in the PIPE offering,
this Warrant may be exercised at any time, and from time to time, subject to
the terms, conditions and adjustments herein set forth, during the period (the
"Exercise Period") commencing on the date of at least One Million Dollars
($1,000,000) from a PIPE offering, and ending on the one year anniversary of
the date of the PIPE offering.
The holder of this Warrant is subject to certain restrictions set forth
in the Subscription Agreement and Investment Letter pursuant to which the
Warrant and Note were issued (the "Subscription Agreement"), and shall be
entitled to certain rights and privileges set forth in the Subscription
Agreement. This Warrant is one of the Warrants referred to as the "Warrants"
in the Subscription Agreement.
1. Exercise of Warrant.
This Warrant may be exercised in whole, but not in part, by the
Warrantholder by (i) the surrender of this Warrant to the Company, with a duly
executed Exercise Form, during normal business hours on the first Monday of
any month during the Exercise Period and (ii) the delivery of payment to the
Company, by (A) cash, wire transfer of immediately available funds to a bank
account specified by the Company, or by certified or bank cashier's check in
lawful money of the United States of America, or (B) by cancellation by the
Warrantholder of indebtedness of the Company to the Warrantholder, or (C) by a
combination of (A) and (B), of the Exercise Price for the number of shares of
Common Stock to which the Warrantholder is entitled upon exercise of this
Warrant. The Company agrees that such Common Stock shall be deemed to be
issued to the Warrantholder as the record holder of such Common Stock as of
the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Common Stock as aforesaid.
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2. Transfer of Warrant.
2.1 Warrant Register. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Warrantholder or
Warrantholders. Any Warrantholder may change his or her 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
Warrantholder may be delivered or given by mail to such Warrantholder as shown
on the Warrant Register and at the address shown on the Warrant Register.
Until this Warrant is transferred on the Warrant Register of the Company, the
Company may treat the Warrantholder as shown on the Warrant Register as the
absolute owner of this Warrant for all purposes, notwithstanding any notice to
the contrary.
2.2 Transferability and Nonnegotiability of Warrant. This Warrant
may not be transferred or assigned in whole or in part without the prior
written consent of the Company.
3. Compliance with Securities Laws.
3.1 The Warrantholder, by acceptance hereof, acknowledges that this
Warrant and any Common Stock issued upon exercise hereof (the "Securities")
are being acquired solely for the Warrantholder's own account and not as a
nominee for any other party, and for investment, and that the Warrantholder
will not offer, sell or otherwise dispose of any Securities except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Warrantholder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Common Stock so purchased are being acquired solely for the
Warrantholder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale.
3.2 This Warrant shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THIS WARRANT AND THE SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER
SUCH ACT AND SUCH LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS."
4. Reservation of Stock. The Company covenants and agrees that all
shares of Common Stock which are issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully-paid and nonassessable and free
from all taxes, liens, security interests, charges and other encumbrances with
respect to the issue thereof, other than taxes in respect of any transfer
occurring contemporaneously with such issue. The Company further covenants
and agrees that, during the Exercise Period, the Company will at all times
have authorized and reserved, and keep available free from preemptive rights,
a sufficient number of shares of Common Stock to provide for the exercise of
the rights represented by this Warrant.
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5. Exchange, Loss or Destruction of Warrant. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant and, in the case of loss, theft or destruction, of
such bond or indemnification as the Company may require, and, in the case of
such mutilation, upon surrender and cancellation of this Warrant, the Company
will execute and deliver a new Warrant of like tenor. The term "Warrant" as
used herein shall be deemed to include any Warrants issued in substitution or
exchange for this Warrant.
6. Ownership of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary.
7. Certain Adjustments.
7.1 The number of shares of Common Stock purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
as follows:
(a) Stock Dividends. If at any time subsequent to the time at
which the number of shares and Exercise Price are determined, but prior to the
exercise of this Warrant (i) the Company shall fix a record date for the
issuance of any dividend payable in Common Stock or (ii) the number of shares
of Common Stock shall have been increased by a subdivision or split-up of
Common Stock, then, on the record date fixed for the determination of holders
of Common Stock entitled to receive such dividend or immediately after the
effective date of subdivision or split-up, as the case may be, the number of
shares of Common Stock to be delivered upon exercise of this Warrant will be
increased so that the Warrantholder will be entitled to receive the number of
shares of Common Stock that such Warrantholder would have owned immediately
following such action had this Warrant been exercised immediately prior
thereto, and the Exercise Price will be adjusted as provided below in
paragraph (f).
(b) Combination of Stock. If at any time subsequent to the to
the time at which the number of shares and Exercise Price are determined , but
prior to the exercise of this Warrant, the number of shares of Common Stock
outstanding shall have been decreased by a combination of the outstanding
shares of Common Stock, then, immediately after the effective date of such
combination, the number of shares of Common Stock to be delivered upon
exercise of this Warrant will be decreased so that the Warrantholder
thereafter will be entitled to receive the number of shares of Common Stock
that such Warrantholder would have owned immediately following such action had
this Warrant been exercised immediately prior thereto, and the Exercise Price
will be adjusted as provided below in paragraph (f).
(c) Reorganization, etc. If at any time subsequent to the to
the time at which the number of shares and Exercise Price are determined, but
prior to the exercise of this Warrant, any capital reorganization of the
Company, or any reclassification of the Common Stock, or any consolidation of
the Company with or merger of the Company with or into any other person or any
sale, lease or other transfer of all or substantially all of the assets of the
Company to any other person (collectively, a "Reorganization"), shall be
effected in such a way that the holders of Common Stock shall be entitled to
receive stock, other securities or assets (whether such stock, other
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securities or assets are issued or distributed by the Company or another
person) with respect to or in exchange for Common Stock, then, upon exercise
of this Warrant the Warrantholder shall have the right to receive the kind and
amount of stock, other securities or assets receivable upon such
Reorganization by a holder of the number of Common Stock that such
Warrantholder would have been entitled to receive upon exercise of this
Warrant had this Warrant been exercised immediately before such Reorganization
subject to adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 7.
(d) Fractional Stock. No fractional shares of Common Stock or
scrip shall be issued to any Warrantholder in connection with the exercise of
this Warrant. The portion of any exercise price received that represents a
fraction of a share will be returned to the Warrantholder.
(e) Carryover. Notwithstanding any other provision of this
Section 7, no adjustment shall be made to the number of shares of Common
Stock to be delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than 5% of the number of shares of Common Stock to
be so delivered, but any lesser adjustment shall be carried forward and shall
be made at the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to 5% or more of
the number of shares of Common Stock to be so delivered.
(f) Exercise Price Adjustment. Whenever the number of shares
of Common Stock purchasable upon the exercise of the Warrant is adjusted as
herein provided (except as to an adjustment resulting from prepayment of the
Note), the Exercise Price payable upon the exercise of this Warrant shall be
adjusted by multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of Common
Stock purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of Common Stock
purchasable immediately thereafter.
(g) No Duplicate Adjustments. Notwithstanding anything else to
the contrary contained herein, in no event will an adjustment be made under
the provisions of this Section 7 to the number of shares of Common Stock
issuable upon exercise of this Warrant or the Exercise Price for any event if
an adjustment having substantially the same effect to the Warrantholder as any
adjustment that otherwise would be made under the provisions of this Section 7
is made by the Company for any such event to the number of shares of Common
Stock issuable upon exercise of this Warrant.
(i) No Adjustment for Distributions. Except as provided in
Section 7, no adjustment in respect of any distributions shall be made during
the term of the Warrant or upon the exercise of this Warrant.
(j) Notice of Adjustment. Whenever the number of shares of
Common Stock issuable upon exercise of this Warrant, or the Exercise Price of
such Common Stock is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to the Warrantholder, notice of such
adjustment or adjustments and a certificate of the chief financial officer of
the Company setting forth the number of shares of Common Stock and the
Exercise Price of such Common Stock after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
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8. No Stockholder Rights. Prior to exercise of this Warrant, the
Warrantholder shall not be entitled to any rights of a stockholder with
respect to the Common Stock, including (without limitation) the right to vote
such Common Stock, receive dividends or other distributions thereon, exercise
preemptive rights or be notified of meetings or unit holders, and such holder
shall not be entitled to any notice or other communication concerning the
business or affairs of the Company. However, nothing in this Section 8 shall
limit the right of the Warrantholder to be provided the Notices required under
this Warrant.
9. Miscellaneous.
9.1 Entire Agreement. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to this Warrant.
9.2 Binding Effects; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and
their respective heirs, personal representatives, successors and assigns.
Nothing in this Warrant, express or implied, is intended to or shall confer on
any person other than the Company and the Warrantholder, or their respective
heirs, personal representatives, successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Warrant.
9.3 Amendments and Waivers. This Warrant may not be modified or
amended except by an instrument or instruments in writing signed by the
Company and the Warrantholder.
9.4 Section and Other Headings. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
9.5 Further Assurances. Each of the Company and the Warrantholder
shall do and perform all such further acts and things and execute and deliver
all such other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Warrant.
9.6 Notices. Any notice or other communication between the parties
hereto shall be in writing and shall be delivered personally, by United States
mail or by telecopier and shall be deemed delivered upon receipt if sent by
personal delivery, upon transmission accompanied by confirmation of
transmission if sent by telecopier, and three (3) business days after deposit
if sent by United States mail. Such notices or communications shall be sent to
the following addresses: (a) if to the Company, at 000 Xxxxxxxx Xxxx, Xxxxx
000, Xxxxx Xxxx, XX 00000, attn: CEO or at such other address or addresses as
may have been furnished in writing by the Company to the Holder, (b) if to the
Warrantholder, at the address set forth on his or her signature page to the
Subscription Agreement, or at such other address or addresses as may have been
furnished to the Company in writing.
9.7 Construction; Severability. This Warrant shall be construed and
enforced in accordance with the internal laws of the State of California. If
any provision of this Warrant is determined by any court of competent
jurisdiction or arbitrator to be invalid, illegal, or unenforceable to any
extent, that provision shall, if possible, be construed as though more
narrowly drawn, if a narrower construction would avoid such invalidity,
illegality, or unenforceability or, if that is not possible, such provision
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shall, to the extent of such invalidity, illegality, or unenforceability, be
severed, and the remaining provisions of this Warrant shall remain in effect.
9.8 Dispute Resolution. In the event that any dispute between the
parties regarding the terms of this Warrant is not resolved by informal
negotiation between the parties, the matter shall be referred to the nearest
office of J.A.M.S./ENDISPUTE for mediation, that is, an informal, non-binding
conference or conferences between the parties in which a neutral panelist will
seek to guide the parties to a resolution of the matter. Each party agrees to
pay its own costs in connection with the mediation and its proportionate share
of the fees and costs of J.A.M.S./ENDISPUTE in connection with the mediation.
Each party agrees to spend a minimum of at least six (6) hours in attempting
to mediate the dispute (unless it is resolved in less than six (6) hours). If
the dispute is not resolved in such time, the parties may elect to continue
mediation or either party may commence litigation or binding arbitration.
9.9 Attorney Fees. In the event that any dispute among any parties
hereto should result in litigation or arbitration, the prevailing party in
such dispute shall be entitled to recover from the other party all reasonable
fees, costs and expenses of enforcing any right of the prevailing party,
including without limitation, reasonable attorneys' fees and expenses, all of
which shall be deemed to have accrued upon the commencement of such action and
shall be paid whether or not such action is prosecuted to judgment. Any
judgment or order entered in such action shall contain a specific provision
providing for the recovery of attorney fees and costs incurred in enforcing
such judgment and an award of prejudgment interest from the date of the breach
at the maximum rate allowed by law. The prevailing party shall mean the party
who is determined in the proceeding to have prevailed or who prevails by
dismissal, default or otherwise and not necessarily the party in whose favor a
judgment or other decision is rendered.
9.10 No Waiver. No failure or delay on the part of any party hereto
in exercising any right or remedy hereunder shall operate as a waiver thereof,
unless such right or remedy is specifically waived in writing. No such waiver
shall be deemed to be a waiver of any other provision hereof or of any
subsequent breach of the same of other provision.
9.11 Market Standoff. By accepting this Warrant, the Warrantholder
agrees not to exercise this Warrant or sell any Common Stock acquired upon
exercise of this Warrant at a time when applicable laws, regulations or
Company trading policies prohibit exercise or sale, including, without
limitation, during any periods (typically during the period preceding the
announcement of quarterly earnings or other material events) in which the
Company closes the "trading window" for sales thereby prohibiting sales during
such periods by Company officers, directors and others.
In addition, if requested by the Company and an underwriter of the Common
Stock (or other securities) of the Company, the Warrantholder shall not
pledge, sell, offer to sell, contract to sell, grant any option to purchase,
make any short sale or otherwise dispose of any Common Stock of the Company,
or any options or warrants to purchase any of the Common Stock of the Company
or any securities convertible into or exchangeable for Common Stock of the
Company, whether now owned or hereafter acquired, during the one hundred
eighty (180) day period following the effective date of a registration
statement of the Company filed under the Securities Act of 1933, as amended
(the "Securities Act"), otherwise than (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound by the
restrictions set forth herein, or (ii) a transfer to any trust for the direct
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or indirect benefit of the Warrantholder or his or her immediate family
provided that the trustee of the trust agrees to be bound by the restrictions
set forth herein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer.
Dated: _______, 2004
THE COMPANY:
Q Matrix, Inc.
By: _____________________________
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EXHIBIT A
THIS WARRANT AND THE SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT
AND SUCH LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
SUCH LAWS.
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase all of the holder's Common Stock
("Common Stock") issuable upon exercise of this Warrant, and herewith tenders
a check in the amount ________________ in full payment of the Exercise Price
therefor.
In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the Common Stock are being acquired solely for the account
of the undersigned and not as a nominee for any other party, or for
investment, and that the undersigned will not offer, sell or otherwise dispose
of any such Common Stock except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws.
Dated: _____________, ______.
___________________________________________
(Signature must conform in all respects to
name of Xxxxxx as specified on the face
of the Note)
__________________________________
__________________________________
(Address)
__________________________________
(Tax ID or Social Security Number)
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address Number of Shares
and does hereby irrevocably constitute and appoint __________________ Attorney
to make such transfer on the books of the Company maintained for the purpose,
with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the Common Stock to be issued upon exercise
hereof or conversion thereof are being acquired for investment and that the
Assignee will not offer, sell or otherwise dispose of this Warrant or any
Common Stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
of 1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Common Stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
Dated: __________, _____.
__________________________
(Signature)
Print name: __________________________
