FORM OF STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS.
DATE OF ORIGINAL ISSUANCE: ____________, 2003
NO. ______ XXXXX RIVER GROUP, INC.
THIS CERTIFIES THAT, for value received, the Holder (as hereafter defined)
is entitled to purchase from the Company up to a total of ____________ shares of
common stock, par value $0.01 per share (the "Common Stock"), of the Company at
an exercise price equal to $100 per share of Common Stock (as adjusted from time
to time as provided in Section 5, the "Exercise Price"), at any time and from
time to time from and after the date hereof and through and including
________________ (the "Expiration Date"), and subject to the following terms and
conditions:
1. Exercise Period. This Warrant shall be exercisable in whole or in part,
commencing on the date hereof, and shall expire and no longer be exercisable
after the Expiration Date.
2. Method of Exercise; Payment.
(a) Cash Exercise. The purchase rights represented by this Warrant may
be exercised by the Holder, in whole or in part, by the surrender of this
Warrant (with the notice of exercise form attached hereto as Attachment A duly
executed) at the principal office of the Company, and by the payment to the
Company, by certified cashier's or other check of an amount equal to the
aggregate Exercise Price for the number of shares of Common Stock being
purchased.
(b) Net Exercise. In lieu of exercising this Warrant pursuant to
Section 2(a) above, the Holder may elect to receive, without the payment by the
Holder of any additional consideration, shares of Common Stock equal to the
value of this Warrant (or the portion thereof being canceled) 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 Common Stock of the Company computed using the following formula:
X = Y (A-B)
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A
Where X = the number of shares of Stock to be issued to the Holder pursuant to
this net exercise.
Y = the number of shares in respect of which the net issue election is
made.
A = the fair market value of one share of Common Stock at the time the net
issue election is made.
B = the Exercise Price (as adjusted to the date of the net issuance).
(c) Fair Market Value. For purposes of Section 2(b), the fair market
value of one share of Common Stock as of a particular date shall be determined
as follows: (i) if traded on a securities exchange or through the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices, as reported by Bloomberg L.P., or the successor to its function of
reporting stock prices, of the securities on such exchange over the ten (10) day
period ending three (3) days prior to the net exercise election; (ii) if traded
over-the-counter, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable), as reported by Bloomberg L.P., or the
successor to its function of reporting stock prices over the ten (10) day period
ending three (3) days prior to the net exercise; and (iii) if there is no active
public market, the value shall be the fair market value thereof, as determined
in good faith by the Board of Directors of the Company.
(d) Stock Certificates. In the event of any exercise of purchase
rights represented by this Warrant, certificates for the number of shares of
Common Stock so purchased shall be delivered to the Holder as soon as
practicable thereafter, and, unless this Warrant has been fully exercised or has
expired, a new Warrant representing the shares with respect to which this
Warrant shall not have been exercised shall also be issued to the Holder within
such time.
3. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
4. Stock Fully Paid; Reservation of Shares. All of the Common Stock
issuable upon the exercise of the rights represented by this Warrant will, upon
issuance and receipt of the Exercise Price therefor, be duly and validly issued,
fully-paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company shall at all times
have authorized and reserved for issuance a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
5. Adjustment of Exercise Price and Number of Shares. The Exercise Price
and number of shares of Common Stock issuable upon exercise of this Warrant are
subject to adjustment from time to time as set forth in this Section 5.
(a) Stock Dividends, Subdivisions and Combinations. If the Company at
any time or from time to time while this Warrant is outstanding (i) pays a stock
dividend on its
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Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) effects a subdivision of the
outstanding Common Stock or (iii) combines the outstanding shares of Common
Stock, then in each such case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment of the Exercise Price under this paragraph (a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common Stock
shall be changed into the same or a different number of shares of any other
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares, stock dividend,
reorganization, merger, consolidation or sale of assets as provided for
elsewhere in this Section 5), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such transaction if it had been, immediately prior to such transaction, the
holder of the number of shares of Common Stock then issuable upon exercise in
full of this Warrant.
(c) Reorganizations, Mergers, Consolidations or Sales of Assets. If
the Company shall be a party to any transaction, including without limitation, a
merger, consolidation, sale of all or substantially all of the Company's assets,
or a reorganization, reclassification or recapitalization of the capital stock
of the Company, but excluding any transaction for which provision for adjustment
is otherwise made in this Section 5 (each of the foregoing being referred to as
a "Transaction"), in each case, as a result of which shares of Common Stock are
converted into the right to receive stock, securities or other property
(including cash or any combination thereof), then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Transaction if it had been, immediately prior to
such Transaction, the holder of the number of Shares of Common Stock then
issuable upon exercise in full of this Warrant (the "Alternate Consideration").
For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any exercise of this Warrant
following such Transaction. The Company shall not effect any Transaction (other
than a consolidation or merger in which the Company is the continuing
corporation) unless prior to or simultaneously with the consummation thereof,
the successor entity or purchaser shall provide that such successor or surviving
entity shall comply with the provisions of this paragraph (c) and insuring that
the Warrant (or any such replacement security) will be similarly adjusted upon
any subsequent transaction analogous to a Transaction. The provisions of this
paragraph (c) shall similarly apply to successive Transactions.
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(d) Issuances at Less than the Exercise Price. While any portion of
this Warrant is outstanding, if the Company issues any shares of Common Stock or
issues any rights, warrants, convertible debt or other securities entitling the
holders thereof to subscribe for, purchase or acquire shares of Common Stock, at
a price per share less than the Exercise Price, then, the Exercise Price shall
be immediately and automatically reduced to such lower price. Such adjustment
shall be made whenever such Common Stock, rights, warrants, convertible debt or
other securities are issued and shall become effective immediately after
issuance of such Common Stock, rights, warrants, convertible debt or other
securities. Notwithstanding the foregoing (I) if every such right, warrant,
convertible debt or other security shall expire or terminate without having been
exercised or converted, the Exercise Price shall immediately upon such
expiration or termination be recomputed, and effective immediately upon such
expiration or termination, be increased to the price which it would have been
(but reflecting any other adjustments in the Exercise Price made pursuant to the
provisions of this Section 5 had the adjustment of the Exercise Price made upon
the issuance of such rights, warrants or convertible debt or other securities
not occurred), and (II) the Exercise Price shall not be adjusted pursuant to
this paragraph (d) upon the issuance of shares of Common Stock in any of the
following circumstances: (1) upon the conversion of any Preferred Stock, (2) as
a dividend on any Preferred Stock, (3) as a dividend on Common Stock, (4) in
connection with Board approved transactions, the primary purpose of which is not
the raising of capital, at a price per share of not less than 75% of the Series
B Conversion Amount (as defined in the Company's Second Amended and Restated
Certificate of Incorporation), provided, that the aggregate number of shares of
Common Stock so issued in any twelve-month period does not exceed 5% of the
Company's book value (determined by the Board of Directors in accordance with
GAAP) measured as of the end of the Company's quarterly financial period
immediately preceding the commencement of such twelve-month period, or (5)
resulting from the grant or exercise of options or other awards under stock
option, employee incentive or similar plans approved by the Board of Directors.
(e) Number of Shares of Common Stock. Simultaneously with any
adjustment to the Exercise Price pursuant to paragraph (a) and (d) of this
Section 5, the number of shares of Common Stock that may be purchased upon
exercise of this Warrant shall be increased or decreased proportionately, so
that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of shares of Common Stock shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment.
(f) Calculations. All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as applicable. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
6. Notice of Adjustments. Whenever the number of shares of Common Stock
purchasable hereunder or the Exercise Price thereof shall be adjusted pursuant
to Section 5 hereof, the Company shall provide notice to the Holder setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
number of shares of Common Stock which may be purchased and the Exercise Price
therefor after giving effect to such adjustment.
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7. Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company, (ii) authorizes or
approves, enters into any agreement contemplating or solicits stockholder
approval for any Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the Company shall
deliver to the Holder a notice describing the material terms and conditions of
such transaction, at least 5 calendar days prior to the applicable record or
effective date on which a person would need to hold Common Stock in order to
participate in or vote with respect to such transaction, and the Company will
take all steps reasonably necessary in order to insure that the Holder is given
the practical opportunity to exercise this Warrant prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that
the failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such notice.
8. Fractional Shares. This Warrant may not be exercised for fractional
shares. In lieu of such fractional shares the Company shall make a cash payment
therefor on the basis of the Exercise Price then in effect.
9. Restrictions on Transferability of Securities.
(a) Restrictions on Transferability. This Warrant and the Common Stock
issuable upon the exercise of the purchase rights represented by this Warrant
(collectively the "Securities") shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Section 9, which conditions
are intended to ensure compliance with the provisions of the Act. Each holder of
any of the Securities will cause any proposed purchaser, assignee, transferee,
or pledgee of the Securities held by such holder to agree to take and hold such
Securities subject to the provisions and upon the conditions specified in this
Section 9.
(b) Restrictive Legend. Each certificate representing the Securities
and any other securities issued in respect of the Securities pursuant to Section
5 shall (unless otherwise permitted by the provisions of Section 9(c) below) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED FOR
INVESTMENT ONLY AND NOT FOR RESALE. THEY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES
LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS FIRST REGISTERED UNDER
SUCH LAWS, UNLESS THE CORPORATION HAS RECEIVED EVIDENCE SATISFACTORY
TO IT THAT REGISTRATION UNDER SUCH LAWS IS NOT REQUIRED.
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Each holder of Securities and each subsequent transferee (hereinafter
collectively referred to as a "Holder") consents to the Company making a
notation on its records and giving instructions to any transfer agent of the
Securities in order to implement the restrictions on transfer established in
this Section 8.
(c) Notice of Proposed Transfers. Each Holder of a certificate
representing the Securities, by acceptance thereof, agrees to comply in all
respects with the provisions of this Section 9(c). Prior to any proposed sale,
assignment, transfer or pledge of any Securities (other than (i) a transfer not
involving a change in beneficial ownership, (ii) in transactions involving the
distribution without consideration of Securities by a Holder to any of its
partners, or retired partners, or to the estate of any of its partners or
retired partners, (iii) a transfer to an affiliated fund, partnership or
company, which is not a competitor of the Company, subject to compliance with
applicable securities laws or (iv) transfers in compliance with Rule 144 under
the Act, so long as the Company is furnished with satisfactory evidence of
compliance with such Rule), unless there is in effect a registration statement
under the Act covering the proposed transfer, the Holder thereof shall give
written notice to the Company of such Xxxxxx's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such Holder's expense, by either
(i) an opinion of counsel (who shall, and whose opinion shall be, addressed to
the Company and reasonably satisfactory to the Company) to the effect that the
proposed transfer of the Securities may be effected without registration under
the Act or (ii) a "no action" letter from the Securities and Exchange Commission
(the "Commission") to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of such
Securities shall be entitled to transfer such Securities in accordance with the
terms of the notice delivered by such Holder to the Company. Each certificate
evidencing the Securities transferred as above provided shall bear, except if
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 9(b) above, except that such certificate shall not bear
such restrictive legend if in the opinion of counsel for such Holder and in the
opinion of counsel for the Company such legend is not required in order to
establish compliance with any provision of the Act.
10. Holder's Representations and Warranties.
(a) Purchase Entirely for Own Account. That the Securities are being
acquired for investment for the Holder's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
the Holder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, the Holder
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person or entity to sell, transfer or grant participation
to such person or to any third person, with respect to any of the Securities.
(b) Disclosure of Information. The Holder has requested and believes
it has received all the information it considers necessary or appropriate for
deciding whether to purchase the Warrant. The Holder further represents that it
has had an opportunity to ask questions, if any, and receive answers from the
Company regarding the terms and conditions of the offering of the Warrant and of
the business as conducted or as proposed to be conducted.
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(c) Investment Experience. The Holder is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, and bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities. Holder also represents it
has not been organized for the purpose of acquiring the Securities.
(d) Regulation D. The Holder is an "Accredited Investor" as that term
is defined in Regulation D promulgated under the Act.
11. No Rights as Stockholders. This Warrant does not entitle the Holder to
any additional voting rights or other rights as a stockholder of the Company
prior to the exercise of the Warrant.
12. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, (b)
upon delivery, if delivered by hand, (c) two (2) business days after the
business day of deposit with Federal Express or similar overnight courier,
freight prepaid or (d) one (1) business day after the business day of facsimile
transmission, if delivered by facsimile transmission with copy by first class
mail, postage prepaid, and shall be addressed (i) if to the Holder, at the
Holder's address as provided to the Company, and (ii) if to the Company, at the
address of its principal corporate offices (attention: Chief Financial Officer),
or at such other address as the Company shall have furnished to the other
parties hereto in writing.
13. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the Holder.
14. Attorneys' Fees. If any action of law or equity is necessary to enforce
or interpret the terms of this Warrant, the prevailing party shall be entitled
to its reasonable attorneys' fees, costs and disbursements in addition to any
other relief to which it may be entitled.
15. Headings. The section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
16. Governing Law. This Warrant and all actions arising out of or in
connection with such Warrant shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to conflicts of law
provisions.
17. Assignment. This Warrant and the rights represented by this Warrant may
not be transferred, assigned or pledged, in whole or in part, without the prior
written consent of the Company, except that a transfer from the Holder to any
other entity which controls, is controlled by or is under common control with
the Holder, may be effected by delivery by the Holder of a form of transfer
attached hereto as Attachment B duly executed at the principal office of the
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Company. The transfer shall be recorded on the books of the Company upon the
surrender of this Warrant, properly endorsed, to the Company at its principal
offices. In the event of a partial transfer, the Company shall issue to the
holders one or more appropriate new warrants.
18. Successors and Assigns. The terms and provisions of this Warrant shall
inure to the benefit of, and be binding upon, the Company and the Holders hereof
and their respective successors and permitted assigns.
19. Entire Agreement. This Warrant constitutes the entire agreement among
the parties hereto and supersedes in its entirety any prior agreements, whether
written or oral, among the parties hereto with respect to the subject matter
hereof.
Issued this ___ day of _____________.
XXXXX RIVER GROUP, INC.
By:
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Name:
Title:
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