Contract
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO ZEROS AND ONES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
Right
to
Purchase 7,500,000
Shares
of Common Stock of Zeros and Ones, Inc. (subject to adjustment as provided
herein)
COMMON
STOCK PURCHASE WARRANT
|
Warrant
Number:
|
Issue
Date: November 9, 2006
|
ZEROS
AND
ONES, INC., a corporation organized under the laws of the State of Nevada,
hereby certifies that, for value received pursuant to the Patent Assignment
Agreement dated November 9, 2006 (the “Agreement”) between the parties hereto,
WAA, LLC, or assigns (the “Holder”), is entitled (the “Warrant”), subject to the
terms set forth below, to purchase from the Company (as defined below) from
and
after the Issue Date of this Warrant and at any time or from time to time before
5:00 p.m., Pacific time, until the Expiration Date (as defined herein), up
to
7,500,000
fully
paid and nonassessable shares of Common Stock, $.001 par value, of the Company,
at the Exercise Price (as defined below). The number and character of such
shares of Common Stock and the Exercise Price are subject to adjustment as
provided herein.
As
used
herein, the following terms, unless the context otherwise requires, have the
following respective meanings:
(a) The
term
“Company” shall mean Zeros and Ones, Inc.
(b) The
term
“Common Stock” shall mean the Company's Common Stock, $.001 par value per share,
and any other securities into which or for which the Common Stock may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The
term
“Expiration Date” shall mean November
9, 2013.
(d) The
term
“Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which
the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant
to
Section 4 or otherwise.
1
(e) The
term
"Exercise Price" shall be $0.07
per share,
subject
to adjustment pursuant to Section 4.
1. Exercise
of Warrant.
1.1. Number
of Shares Issuable upon Exercise.
From
and after the date hereof through and including the Expiration Date, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or in
part,
shares of Common Stock of the Company, subject to adjustment pursuant to Section
4, by delivery of an original or fax copy of the exercise notice attached hereto
as Exhibit A (the “Exercise Notice”) along with payment to the Company of the
Exercise Price.
2.
Procedure
for Exercise.
2.1 Delivery
of Stock Certificates, etc. on Exercise.
The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which both the Exercise Notice
and payment have been made for such shares. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within five
business days thereafter, the Company at its expense (including the payment
by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, or as such Holder (upon payment by such holder of
any
applicable transfer taxes) may direct in compliance with applicable securities
laws, a certificate or certificates for the number of duly and validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which such Holder shall be entitled on such exercise.
2.2. Exercise.
2.2.1 Cash
Payment.
Payment
may be made either in cash or by certified or official bank check payable to
the
order of the Company equal to the applicable aggregate Exercise Price for the
number of shares of Common Stock specified in the Exercise Notice (as such
exercise number shall be adjusted to reflect any adjustment in the total number
of shares of Common Stock issuable to the Holder per the terms of this Warrant)
and the Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of Common
Stock
(or Other Securities) determined as provided herein.
2.2.2 Exchange.
If the
Holder elects the exchange option, the Holder shall be entitled (without cash
payment) to receive that number of shares of Common Stock having an aggregate
Market Value on the date of exercise equal to the difference between the Market
Value of the total number of shares being exercised and the aggregate Exercise
Price thereof. For purposes of this Section 2.2.2, "Market Value" on any given
date means (i) the average closing price of the Common Stock for the prior
ten
trading days on the principal stock exchange on which the Common Stock is then
traded or (ii) if not so traded, the closing (or, if no closing price is
available, the average of the bid and asked prices) for such period on the
NASDAQ if such the Common Stock is listed on NASDAQ, the OTC Bulletin Board,
or
the Pink Sheets, or (iii) if not listed on any exchange or quoted on the NASDAQ
or other electronic market, such value (determined without discount for
illiquidity or minority status) as may be determined in good faith by the
Company's Board of Directors, which determination shall be conclusively binding
on the parties, except that, at the request of the Holder, the fair price shall
be determined by an investment banking firm reasonably acceptable to the
Company, whose fees will be split by the Holder and the Company 50/50 unless
the
Market Price so determined exceeds 110% of that set by the Board, in which
case
the fees will be paid by the Company.
2
3. Adjustment
for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization,
Consolidation, Merger, etc.
In case
at any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or entity, or (c) transfer
all or substantially all of its properties or assets to any other person or
entity under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition to the consummation of such
a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder of this Warrant, on the exercise hereof as provided in Section 1
at
any time after the consummation of such reorganization, consolidation or merger
or the effective date of such dissolution, as the case may be, shall receive,
in
lieu of the Common Stock (or Other Securities) issuable on such exercise prior
to such consummation or such effective date, the stock and other securities
and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if
such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.
3.2. Dissolution.
In the
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock
and
other securities and property (including cash, where applicable) receivable
by
the Holder of the Warrant after the effective date of such dissolution pursuant
to Section 3.1 to a bank or trust company as trustee for the Holder of the
Warrant.
3.3. Continuation
of Terms.
Upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable
to
the shares of stock and other securities and property receivable on the exercise
of this Warrant after the consummation of such reorganization, consolidation
or
merger or the effective date of dissolution following any such transfer, as
the
case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether
or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full
force
and effect after the consummation of the transactions described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrant be delivered
to
a trustee as contemplated by Section 3.2.
3
4. Adjustments
for Stock Splits, Combinations, etc.
In the
event that the Company shall (a) issue additional shares of the Common Stock
as
a dividend or other distribution on outstanding Common Stock, (b) subdivide
its
outstanding shares of Common Stock, or (c) combine its outstanding shares of
the
Common Stock into a smaller number of shares of the Common Stock, then, in
each
such event, the Exercise Price shall, simultaneously with the happening of
such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect.
The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon
the
happening of any successive event or events described herein in this Section
4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number
of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
on the date of such exercise.
5. Certificate
as to Adjustments.
In each
case of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrant, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee
to
compute such adjustment or readjustment in accordance with the terms of the
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment
is
based, including a statement of (a) the consideration received or receivable
by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
and (c) the Exercise Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to
the
Holder of the Warrant and any Warrant agent of the Company (appointed pursuant
to Section 10 hereof).
6. Reservation
of Stock Issuable on Exercise of Warrant.
The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the
Warrant.
7. Assignment;
Exchange of Warrant.
Subject
to compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
“Transferor”) with respect to any or all of the shares underlying this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, which shall include, without
limitation, a legal opinion from the Transferor’s counsel that such transfer is
exempt from the registration requirements of applicable securities laws, the
Company at Transferor’s expense but with payment by the Transferor of any
applicable transfer taxes) will issue and deliver to or on the order of the
Transferor thereof a new Warrant of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each
a
“Transferee”), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.
4
8. Replacement
of Warrant.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement
or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant,
the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
9. Registration
Rights.
If the
Company at any time proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both, except with respect to registration
statements on Forms X-0, X-0 or another form not available for registering
the
shares of Common Stock underlying the Warrant (“Warrant Shares”) , the Company
shall include the Warrant Shares in such Registration Statement, subject to
any
cutback required by any underwriter of such offering delivered in writing to
the
Company and provided that Xxxx Xxxxxxx and Xxxxx Xxxxxxxxx are also subject
to a
similar cutback.
10. Warrant
Agent.
The
Company may, by written notice to each holder of the Warrant, appoint an agent
for the purpose of issuing Common Stock (or Other Securities) on the exercise
of
this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section
7, and replacing this Warrant pursuant to Section 8, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may
be,
shall be made at such office by such agent.
11. Transfer
on the Company's Books.
Until
this Warrant is transferred on the books of the Company, the Company may treat
the registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
12. Notices,
etc.
All
notices and other communications from the Company to the Holder of this Warrant
shall be mailed by first class registered or certified mail, postage prepaid,
at
such address as may have been furnished to the Company in writing by the Holder
or, until any new holder furnishes to the Company an address, then to, and
at
the address of, the last holder of this Warrant who has so furnished an address
to the Company.
5
13. Miscellaneous.
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. This Warrant shall
be governed by and construed in accordance with the laws of State of California
without regard to principles of conflicts of laws. Any action brought concerning
the transactions contemplated by this Warrant shall be brought only in the
state
courts of California or in the federal courts located in the state of
California. The individuals executing this Warrant on behalf of the Company
agree to submit to the jurisdiction of such courts and waive trial by jury.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of
law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute
or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Warrant. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision. The Company acknowledges
that legal counsel participated in the preparation of this Warrant and,
therefore, stipulates that the rule of construction that ambiguities are to
be
resolved against the drafting party shall not be applied in the interpretation
of this Warrant to favor any party against the other party.
IN
WITNESS WHEREOF, the Company has executed this Warrant under seal as of the
date
first written above.
| ZEROS AND ONES, INC. | ||
| |
|
|
|
/s/
Xxxx X. Xxxxxxx
|
||
|
BY: Xxxx X. Xxxxxxx |
||
| ITS: Chief Executive Officer | ||
6
Exhibit
A
EXERCISE
NOTICE
(To
be
signed only on exercise of Warrant)
TO:
Zeros
and Ones, Inc.
The
undersigned, pursuant to the provisions set forth in the attached Warrant,
hereby irrevocably elects to purchase (check applicable box):
___
________
shares of the Common Stock covered by such Warrant; and/or
|
___
|
the
maximum number of shares of Common Stock covered by such Warrant
pursuant
to the Exchange procedure set forth in Section
2.2.2.
|
The
undersigned herewith makes payment of the full Exercise Price for such shares
at
the price per share provided for in such Warrant, which is an aggregate of
$_______________________.
Such
payment takes the form of (check applicable box or boxes):
___
$__________
in lawful money of the United States; and/or
|
___
|
the
cancellation of such portion of the attached Warrant as is exercisable
for
a total of _______ shares of Common Stock (using a Market Value of
$_______ per share for purposes of this
calculation).
|
The
undersigned requests that the certificates for such shares be issued in the
name
of, and delivered to ________________________________________________________
whose
address is
_______________________________________________________________.
The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the “Securities Act”) or pursuant to an exemption from registration
under the Securities Act.
| Dated: ___________________ | _________________________________________________________ |
| (Signature must conform to name of holder as specified on the face of the Warrant) |
7
Exhibit
B
FORM
OF
TRANSFEROR ENDORSEMENT
(To
be
signed only on transfer of Warrant)
For
value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the number of shares of Common Stock of Zeros
and
Ones, Inc. to which the within Warrant relates specified under the heading
“Number Transferred,” respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the
books
of Zeros and Ones, Inc. with full power of substitution in the
premises.
|
Transferees
|
Number
Transferred
|
|
| Dated: ___________________ | _________________________________________________________ |
| (Signature must conform to name of holder as specified on the face of the Warrant) |
8
