THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF UNLESS IT IS AT THE TIME SO REGISTERED OR THE SALE OR
OTHER TRANSFER OR DISPOSITION THEREOF IS MADE PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY THE ACT OR RULES AND REGULATIONS THEREUNDER AND
APPLICABLE STATE LAWS.
WARRANT
FOR THE PURCHASE OF SERIES F PREFERRED STOCK
PAR VALUE $.00000001 PER SHARE
of
NETOBJECTS, INC.
VOID AFTER DECEMBER 23, 2002
THIS CERTIFIES THAT, for value received, IBM Credit Corporation ("IBM
Credit") or assigns (the "Holder") is entitled, in accordance with the terms and
conditions hereinafter set forth, at any time on or before December 23, 2002, to
purchase up to 500,000 (as such number may be adjusted) shares of Series F
Preferred Stock, par value $.00000001 per share (the "Series F Preferred
Stock"), of NETOBJECTS, INC., a Delaware corporation (hereinafter called the
"Company"), at the exercise price hereinafter set forth, and to receive a
certificate or certificates for the shares of Series F Preferred Stock so
purchased, upon presentation and surrender of this Warrant, at the principal
office of the Company, which, as of the date hereof, is located at 000 Xxxxxxxxx
Xxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000, together with the exercise price of the
shares so purchased. The number of shares purchasable upon exercise of this
Warrant and the exercise price shall be subject to adjustment from time to time
as set forth below. This Warrant is issued under and pursuant to the terms of
the Revolving Loan and Security Agreement dated December 23, 1997 (the "Loan
Agreement"), between the Company and IBM Credit.
1. RESERVATION OF SHARES. The Company shall at all times reserve and
keep available out of its authorized but unissued Series F Preferred Stock,
solely for issuance and delivery upon exercise of this Warrant, such number of
shares of Series F Preferred Stock as shall from time to time be issuable upon
exercise of this Warrant.
All shares which may be issued upon the exercise of this Warrant shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable
and be free from all taxes, liens and charges in respect of the issuance
thereof.
2. TERM. The purchase rights represented by this Warrant are exercisable
at the option of the Holder in whole at any time, or in part from time to time,
on or before December 23, 2002. In case of the purchase of fewer than all the
shares purchasable under this Warrant, the Company shall cancel this Warrant
upon surrender hereof and, provided the unexercised portion has not expired as
provided above, shall execute and deliver a new Warrant of like tenor and date
for the balance of the shares purchasable hereunder.
3. INVESTMENT REPRESENTATION. IBM Credit, by accepting this Warrant,
represents that this Warrant is acquired for IBM Credit's own account for
investment purposes and not with a view to any offering or distribution and that
IBM Credit has no present intention of selling or otherwise disposing of this
Warrant or any portion hereof or the underlying shares of Series F Preferred
Stock in violation of applicable securities laws.
4. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights whatsoever except the rights herein expressed, and
no dividend or interest shall be payable or accrue in respect of this Warrant or
the interest represented hereby or the shares purchasable hereunder until and
unless, and except to the extent that, this Warrant shall be exercised.
5. WARRANT UNREGISTERED. Neither this Warrant nor any of the shares to
be issued upon the exercise hereof have been registered under the Securities Act
of 1933, as amended (the "Act"). Accordingly, this Warrant and the shares of
Series F Preferred Stock issuable upon exercise of this Warrant may not be sold,
transferred or otherwise disposed of unless they are so registered or an
exemption from registration is available.
6. TRANSFERS AND EXCHANGES. Upon surrender by the Holder of this
Warrant, properly endorsed, at the office of the Company for registration of
transfer or for exchange, the Company at its expense shall execute and deliver
in exchange therefor a new Warrant or Warrants of the same tenor, in the name of
such Holder or registered as such Holder may request, evidencing, in the
aggregate, the right to purchase an equal number of shares of Series F Preferred
Stock as the Warrant so surrendered.
7. EXERCISE PRICE. The purchase price for each share of Series F
Preferred Stock which the Holder has the right to purchase hereunder
(hereinafter called the "Exercise Price") shall be $1.80. The Exercise Price
for the shares of Series F Preferred Stock which the Holder has the right to
purchase hereunder shall be paid in cash or by certified or official bank check
at the time of exercise. In lieu of exercising this Warrant as provided in the
preceding sentence, at any time on or after the effective date of a Form S-1
registration statement relating to common stock of the Company ("Company Common
Stock") filed by the Company pursuant to the Act, the Holder may
2
elect to receive shares equal to the value of this Warrant (or any portion
thereof remaining unexercised) by surrender of this Warrant at the principal
office of the Company together with notice of such election, in which event the
Company shall issue to the Holder a number of shares of Company Common Stock (if
Company Common Stock is then issuable upon exercise of this Warrant pursuant to
Section 8 hereof) computed using the following formula:
Y (A - B)
X = ---------
A
Where X = the number of shares of Company Common Stock to be issued to
the Holder.
Y = the number of shares of Company Common Stock purchasable
under this Warrant (at the date of such calculation).
A = the fair market value of one share of Company Common Stock
(at the date of such calculation).
B = Exercise Price (as adjusted to the date of such
calculation).
For purposes of this subsection fair market value of one share of the
Company Common Stock shall mean the average of the closing price of Company
Common Stock quoted on the Nasdaq Stock Market or on any exchange on which
Company Common Stock is listed, whichever is applicable, as published in the
Western Edition of THE WALL STREET JOURNAL for the five (5) trading days prior
to the date of determination of the fair market value.
8. ADJUSTMENTS TO THE SHARES; ANTIDILUTION PROVISION.
(a) If the Company (A) pays a dividend or makes a distribution on the
Series F Preferred Stock in shares of Series F Preferred Stock, (B) subdivides
or combines its outstanding shares of Series F Preferred Stock into a greater or
smaller number of shares or (C) issues by reclassification of the Series F
Preferred Stock any shares of capital stock of the Company, the Exercise Price
in effect immediately prior to such action shall be adjusted so that the Holder
of this Warrant thereafter surrendered for exercise shall be entitled to
receive, at the time of such exercise, the number of shares of Series F
Preferred Stock or other capital stock of the Company that it would have owned
or been entitled to receive immediately following such action had this Warrant
been exercised immediately prior thereto or on the record date therefor,
whichever is earlier. Such adjustment shall become effective immediately after
the
3
record date, in the case of a dividend or distribution, or immediately after the
effective date, in the case of a subdivision, combination or reclassification.
The shares of Series F Preferred Stock issued or issuable under
the terms of the Warrant shall be entitled to the same antidilution protection
as provided for shares of Series F Preferred Stock in the Company's Restated
Certificate of Incorporation as if such shares had been outstanding from the
issue date of the Warrant.
(b) Upon any 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, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that the Holder would have received for the shares
issuable hereunder if this Warrant had been exercised immediately before such
reclassification, exchange, substitution, or other event. Such an event shall
include any automatic conversion of the outstanding or issuable securities of
the Company of the same class or series as the shares issuable hereunder to
common stock pursuant to the terms of the Company's Restated Certificate of
Incorporation upon the closing of a registered public offering of Company Common
Stock. 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 Section 8 including, without
limitation, adjustments to the Exercise Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 8(b) shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
9. STOCK CERTIFICATES. As soon as practicable after exercise of this
Warrant and in any event within two business days thereafter, the Company at its
expense shall cause to be issued in the name of the Holder hereof or (subject to
Section 6) any person designated by such Holder, a certificate or certificates
for the number of shares of Series F Preferred Stock to which such Holder shall
be entitled upon such exercise. The issuance of stock certificates upon the
exercise of this Warrant shall be made without charge to the Holder for any tax
in respect of the issuance thereof.
10. REGISTRATION. The shares of Series F Preferred Stock issuable upon
exercise of this Warrant shall be entitled to the registration rights set forth
in a Registration Rights Agreement dated April 11, 1997 between the Company and
International Business Machines Corporation ("IBM"), as amended by a First
Amendment to Registration Rights Agreement among the Company, IBM and IBM Credit
dated December 23, 1997.
11. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
4
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its proper officers thereunto duly authorized and the Company's corporate
seal to be hereunto affixed as of this 14th day of May 1998.
NETOBJECTS, INC.
By:
--------------------------------
Title:
-----------------------------
5
PURCHASE FORM
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase shares
of Series F Preferred Stock as provided for herein and herewith tenders in
payment for such shares of Series F Preferred Stock payment of the purchase
price in full in the form of cash or a certified or official bank check payable
to the order of NETOBJECTS, INC., or a combination thereof in the amount of
$ , all in accordance with the terms hereof. The
undersigned requests that a certificate for such shares of Series F Preferred
Stock be registered in the name of whose
address is and that such
certificates shall be delivered to whose address is
. If said number of
shares of Series F Preferred Stock is fewer than all the shares of Series F
Preferred Stock purchasable hereunder, the undersigned requests that a new
Warrant representing the right to purchase the remaining balance of the shares
of Series F Preferred Stock be registered in the name of whose
address is and that such
certificates shall be delivered to whose address is
.
Dated:
------------------------------
------------------------------
(Insert social security or other identifying number of holder)
Signature:
-----------------------------
Note: (Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant in every particular,
without alteration or
enlargement or any change
whatsoever, unless this
Warrant has been assigned.)
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto (Name and Address of Assignee
Must be Printed or Typewritten) the within Warrant, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
, Attorney, to transfer said
Warrant on the books of the within-named Company, with full power of
substitution in the premises.
Dated:
-------------------------
--------------------------------------------
Signature of Registered Holder
Note: The above signature must correspond
to the name as written on the face
of this Warrant in every
particular, without alteration or
enlargement or any change
whatsoever.
