NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIDELITY HOLDINGS, INC.
ADJUSTABLE WARRANT
Warrant No. [ ] Dated: December 8, 1999
Fidelity Holdings, Inc., a Nevada corporation (the "Company"), hereby
certifies that, for value received, [ ], or its registered assigns ("Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company
up to the total number of shares of Common Stock, $.01 par value per share (the
"Common Stock"), of the Company (each such share, a "Warrant Share" and all such
shares, the "Warrant Shares") calculated pursuant to Section 3 of this Warrant
at an exercise price equal to $.01 per share (as adjusted from time to time as
provided in Section 9, the "Exercise Price"), at the times set forth herein
through and including the Third Vesting Period Expiration Date (as defined in
Section 3(a)(iii) hereof) (the "Expiration Date"), and subject to the following
terms and conditions (certain terms used herein are defined in Exhibit A
attached hereto):
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company
shall not be affected by notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and
signed, to the Transfer Agent or to the Company
-1-
at the address specified in Section 13. Upon any such registration
or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred
shall be issued to the transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall
be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance of
such transferee of all of the rights and obligations of a holder of
a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at the address specified in
Section 13 for one or more New Warrants, evidencing in the aggregate
the right to purchase the number of Warrant Shares which may then be
purchased hereunder. Any such New Warrant will be dated the date of
such exchange.
3. Duration, Vesting and Exercise of Warrant.
(a) The vesting of the Warrant Shares which the Holder is permitted to
acquire pursuant to this Warrant shall occur on the dates set forth
below in this Section 3(a). On each such date, this Warrant shall
vest with respect to a number of Warrant Shares calculated pursuant
to Section 3(b) below. Warrant Shares that have vested on a Vesting
Date (as defined below) may be acquired by the Holder at any time
and from time to time only during the forty (40) Trading Days
following such Vesting Date, upon exercise of this Warrant,
provided, that each such forty (40) Trading Day period shall be
extended by the number of days during such period which the Holder
is for any reason unable to use the Underlying Shares Registration
Statement or the prospectus thereunder in order to sell securities
thereunder.
(i) The first vesting date (the "First Vesting Date") shall be the
fortieth (40th) Trading Day following the Effectiveness Date,
provided, that if the Effectiveness Date shall not have
occurred prior to the Effectiveness Required Date, then at the
option of the Holder (exercisable by notice delivered to the
Company no later than three (3) Trading Days following the
Effectiveness Required Date), the First Vesting Date shall
occur on the (30th) Trading Day following the Effectiveness
Required Date (the Warrant Shares with respect to which this
Warrant is exercisable on the First Vesting Date are called
the "First Reset Warrant Shares");
(ii) The second vesting date (the "Second Vesting Date") shall be
the fortieth (40th) Trading Day following the First Vesting
Date (the Warrant Shares with respect to which this Warrant is
exercisable on the Second Vesting Date are called the "Second
Reset Warrant Shares"); and
-2-
(iii) The third vesting date (the "Third Vesting Date," and together
with the First Vesting Date and the Second Vesting Date, the
"Vesting Dates") shall be the fortieth (40th) Trading Day
(such forty (40) Trading Period, as extended pursuant to the
last sentence of Section 3(a), the "Third Vesting Date
Expiration Date") following the Second Vesting Date (the
Warrant Shares with respect to which this Warrant is
exercisable on the Third Vesting Date are called the "Third
Reset Warrant Shares").
(b) Except as otherwise set forth in this Warrant, this Warrant shall
vest and become exercisable on each Vesting Date with respect to the
number of Warrant Shares calculated in accordance with the following
formula:
(Applicable Share Number) x [(Purchase Price x 1.15) - Adjustment Price]
------------------------------------------------------------------------
Adjustment Price
If the number calculated in accordance with the foregoing formula is zero
or a negative number, the Holder shall not be obligated to transfer any shares
of Common Stock to the Company. On each Vesting Date, the Company shall send a
notice to the Holder setting forth in reasonable detail its calculation of the
number of Warrant Shares which shall vest and be exercisable on such Vesting
Date. Notwithstanding anything to the contrary set forth herein, if, on any
Trading Day occurring after the Effectiveness Date during which (1) for the
immediately preceding fifteen (15) Trading Days there was an effective
Underlying Shares Registration Statement pursuant to which the Holder was
permitted to resell Underlying Shares and (2) the average of the Per Share
Market Values for the fifteen (15) Trading Days immediately preceding such date
equaled or exceeded $25.50 (the "Threshold Price"), then this Warrant shall not
vest for any Warrant Shares with respect to any Vesting Date that would occur
after the expiration of such fifteen (15) Trading Day period, provided, that the
application of this sentence shall have no effect on the vesting of Warrant
Shares in respect of a Vesting Date unless all of the Trading Days used to
calculate such fifteen (15) Trading Day average occurred prior to the 15th
Trading Day immediately preceding such Vesting Date, but shall terminate vesting
rights with respect to subsequent Vesting Dates, if any.
(c) The vesting of the Warrant Shares in accordance with this Section 3
shall not be affected by any failure by the Company to cause the
Underlying Shares Registration Statement declared effective by the
Commission or maintain the effectiveness of the Underlying Shares
Registration Statement after it has been declared effective by the
Commission.
(d) Notwithstanding anything herein to the contrary, if on any Vesting
Date the Adjustment Price shall be less than $11.125 (such an
Adjustment Price, the "Floor Price"), then on such Vesting Date: (i)
this Warrant shall vest with respect to the Warrant Shares pursuant
to Section 3(a) and (b) hereof, provided, that the Adjustment Price
pursuant to the formula set forth in Section 3(b) shall, exclusively
for purposes of this Section 3(d)(i), equal the Floor Price (such
number of Warrant
-3-
Shares, the "Initial Shares") and (ii) with respect to the Warrant
Shares whose vesting would result in a vesting of Warrant Shares in
excess of the Initial Shares, the Company will have the option to
elect by written notice (the "Notice") delivered to the Holder no
later than twenty (20) Trading Days prior to the applicable Vesting
Date to either (x) pay to the Holder, in cash (the "Cash Payment"),
within three (3) Trading Days from the Vesting Date at issue, an
amount equal to the product obtained by multiplying (A) the
applicable Adjustment Price and (B) the difference between the
number of Warrant Shares which would have otherwise vested on such
Vesting Date pursuant to Section 3(a) and (b) hereof and the Initial
Shares (such number of Warrant Shares, the "Subsequent Shares") or
(y) allow this Warrant to vest with respect to the Subsequent
Shares. A failure by the Company to deliver the Notice to the Holder
pursuant to the terms of this Section shall constitute an election
by the Company to allow this Warrant to vest as to the Subsequent
Shares pursuant to the terms hereof. If the Company shall fail to
pay the Cash Payment in full to the Holder by the third (3rd)
Trading Day from the Vesting Date at issue, then, at the election of
the Holder, the Company shall either (x) pay to the Holder $5,000
per day until the Cash Payment and all additional payments due
hereunder are paid in full, or (y) allow this Warrant to vest with
respect to the Subsequent Shares.
(e) Notwithstanding the foregoing provisions of this Section 3, at any
time within ten (10) Trading Days following the occurrence of any of
the following events (each, an "Event"), the Holder shall have the
option to elect by notice ("Vesting Notice") to the Company to have
this Warrant vest with respect to those Warrant Shares that have not
yet already vested:
(i) The occurrence of a Change of Control Transaction;
(ii) Immediately prior to an assignment by the Company for the
benefit of creditors or commencement of a voluntary case under
the Federal Bankruptcy Code, or an entering into of an order
for relief in an involuntary case under the Federal Bankruptcy
Code, or adoption by the Company of a plan of liquidation or
dissolution;
(iii) Five (5) Business Days prior to the proposed consummation with
respect to the Company of a "Rule 13e-3 transaction" as
defined in Rule 13e-3 under the Exchange Act (or, if
necessary, such earlier date as the Company shall determine in
good faith to be required in order for the Holder to be able
to participate in such transaction), it being agreed that the
Holder will receive actual notice of the 13e-3 Statement filed
with the Commission on the date filed and actual notice of the
date of acceleration hereunder no later than such date, and
that if such transaction is not consummated, and this Warrant
has been exercised, then the Holder (and to the extent that
this Warrant would not but for this paragraph be exercisable,
the Company) shall be entitled to declare
-4-
the exercise null and void and the Holder shall, upon return
of the Warrant Shares to the Company, be entitled to receive a
refund of the Exercise Price and warrants identical to this
Warrant, and such acceleration shall become void ab initio,
and the Warrants shall (as to any remaining unexercised
portion thereof) remain in full force and effect in accordance
with the terms hereof;
(iv) For any period of three (3) Trading Days (which need not be
consecutive Trading Days) commencing on or after the date of
issuance of this Warrant, there shall be no closing bid price
on the Common Stock on the Nasdaq or a Subsequent Market;
(v) The Common Stock fails to be listed or quoted for trading on
the Nasdaq or a Subsequent Market or for a period of three (3)
Trading Days (which need not be consecutive Trading Days);
(vi) A holder of Registrable Securities (as defined in the
Registration Rights Agreement) is not permitted to sell
Registrable Securities under an Underlying Shares Registration
Statement for any reason for five (5) or more days (whether or
not consecutive); or
(vii) The Company shall fail or default in the timely performance of
any material obligation under the Transaction Documents and
such failure or default shall continue uncured for a period of
five (5) Business Days after the date on which notice of such
failure or default is first given to the Company (it being
understood that no prior notice need be provided in the case
of defaults which cannot reasonably be cured within a 5-day
period); provided that no such failure or default shall be
considered to have occurred for purposes of this clause (vii)
for a failure of an Underlying Shares Registration Statement
to be declared effective until the 150th day after the
issuance of this Warrant.
In the event the Holder delivers a Vesting Notice, this Warrant
shall vest with respect to the number of Warrant Shares calculated in accordance
with the formula set forth on Section 3(b); provided, however that for purposes
of such calculation, (i) the "Applicable Share Number" shall be deemed to mean
(A) 100% of the number of shares of Common Stock purchased by the Holder
pursuant to the Purchase Agreement (such number, the "Holder Purchased Shares"),
if the Event occurred prior to the First Vesting Date, (B) 66% of the Holder
Purchased Shares, if the Event occurred on or after the First Vesting Date but
prior to the Second Vesting Date and (C) 33% of the Holder Purchased Shares if
the Event occurred on or after the Second Vesting Date but prior to the Third
Vesting Date; and (ii) the "Adjustment Price" shall be deemed to mean the
average of the ten (10) lowest Per Share Market Values (which need not occur on
consecutive Trading Days) during the forty (40) Trading Days immediately
preceding the date on which the Event occurred.
-5-
(f) Subject to Sections 3(a) and (b), this Warrant shall be exercisable
by the registered Holder on any Business Day before 6:30 P.M., New
York City time, at any time and from time to time on or after the
date hereof to and including the Expiration Date. At 6:30 P.M., New
York City time on the Expiration Date, the portion of this Warrant
not exercised prior thereto shall be and become void and of no
value.
(g) Subject to Sections 3(a) and (b), this Warrant shall be exercisable,
either in its entirety or, from time to time, for a portion of the
number of Warrant Shares. If less than all of the Warrant Shares
which may be purchased under this Warrant are exercised at any time,
the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this
Warrant.
4. Delivery of Warrant Shares.
(a) Subject to Sections 2(b), 7 and 11, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in
Section 13 and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase
hereunder, in the manner provided hereunder, all as specified by the
Holder in the Form of Election to Purchase, the Company shall
promptly (but in no event later than three (3) Trading Days after
the Date of Exercise (as defined herein)) issue or cause to be
issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares issuable upon such exercise, free
of restrictive legends, except in the event that both an Underlying
Shares Registration Statement is not then effective and the Warrant
Shares are not freely transferable without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"). Any person so designated by
the Holder to receive Warrant Shares shall be deemed to have become
holder of record of such Warrant Shares as of the Date of Exercise
of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section
4(a) by the third (3rd) Trading Day after the Date of Exercise, the
Company shall pay to such Holder, in cash, as liquidated damages and
not as a penalty, $5,000 for each day after such third (3rd) Trading
Day until such certificates are delivered. Nothing herein shall
limit the
-6-
Xxxxxx's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon
exercise within the period specified herein and the Holder shall
have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law. The
Company shall, upon request of the Holder, if available, use its
best efforts to deliver Warrant Shares hereunder electronically
through the Depository Trust Corporation or another established
clearing corporation performing similar functions.
(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates
representing the Warrant Shares pursuant to Section 4(a) by the
third (3rd) Trading Day after the Date of Exercise, and if after
such third (3rd) Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the
Holder was entitled to receive upon such exercise (a "Buy-In"), then
the Company shall pay (1) in cash to the Holder (in addition to any
remedies available to or elected by the Holder) the amount by which
(x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the product of (A) the number of Warrant Shares that the
Company was required to deliver pursuant to Section 4(b) to the
Holder in connection with the exercise at issue and (B) the Per
Share Market Value at the time of the sale giving rise to such
purchase obligation and (2) deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations under
Section 4(b). For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted exercise of shares of Common Stock with a
market price on the date of exercise in the amount of $10,000, under
clause (1) of the immediately preceding sentence the Company shall
be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder
in respect of the Buy-In. Notwithstanding anything contained herein
to the contrary, if the Holder requires the Company to make payment
in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full such
payment, the Company shall not be required to pay such Holder
liquidated damages under Section 4(b) in respect of the certificates
resulting in such Buy-In.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination,
-7-
or any breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with the issuance of Warrant
Shares. If the Company breaches its obligations under this Warrant,
then, in addition to any other liabilities the Company may have
hereunder and under applicable law, the Company shall pay or
reimburse the Holder on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses).
5. Piggyback Registration Rights. The Holder shall be entitled to the
piggyback registration rights afforded to a holder pursuant to Section
6(f) of that certain Registration Rights Agreement dated as of the date
hereof, among the Company and the signatories thereto.
6. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder and the Company shall not be required to
issue or cause to be issued or deliver or cause to be delivered the
certificates for Warrant Shares unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount
of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid. The Holder shall be responsible
for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.
Applicants for a New Warrant under such circumstances shall also comply
with such other reasonable regulations and procedures and pay such other
reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder (taking
into account the adjustments and restrictions of Section 9). The Company
covenants that all Warrant Shares that shall be so issuable and
deliverable shall, upon issuance and the payment of the applicable
Exercise Price
-8-
in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time
to time as set forth in this Section 9. Upon each such adjustment of the
Exercise Price pursuant to this Section 9, the Holder shall thereafter
prior to the Expiration Date be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or on any other class of
capital stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock into a larger number of shares,
or (iii) combine outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and
shall apply to successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holder shall
have the right thereafter to exercise this Warrant only for the
shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holder shall be entitled
upon such event to receive such amount of securities, cash or
property as equals the number of Warrant Shares such Holder would
have been entitled to had the Holder exercised this Warrant in full
immediately prior to such reclassification or share exchange. This
provision shall similarly apply to successive reclassifications or
share exchanges.
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to holders of
this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those
referred to in Sections 9(a), (b) and (d)) (collectively, "Assets"),
then in each such case, the Holder shall be entitled to receive, for
each Warrant Share with respect to which this Warrant is exercised
after the record date fixed for determination of stockholders
entitled to
-9-
receive such distribution, the Assets received by all holders of
Common Stock with respect to one share of Common Stock.
(d) If, within 90 Trading Days of any Vesting Date, the Company or any
subsidiary thereof shall issue or cause to be issued rights,
warrants, debt or other securities entitling the holder thereof to
acquire, or shall otherwise sell or distribute shares of Common
Stock or other securities, other than (i) issuances pursuant to any
exercise or conversion of any warrants, options, subscriptions,
convertible notes, convertible debentures, convertible preferred
stock or other convertible securities issued and outstanding on the
Closing Date (as defined in the Purchase Agreement) and set forth on
Schedule 2.1(c) to the Purchase Agreement in accordance with the
terms of such securities as of such date; (ii) issuances pursuant to
any grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company
now existing or to be implemented in the future, or upon grant or
exercise of any stock or options to or by any officer, director or
employee, whether or not under a plan, so long as the issuance of
such stock or options is approved by a majority of the non-employee
members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for
such purpose; (iii) issuances pursuant to any Closing Warrants (as
defined in the Purchase Agreement) issued pursuant to the Purchase
Agreement; (iv) securities issued in connection with an underwritten
public offering of the Company; (v) securities issued in connection
with any merger, acquisition or consolidation, or purchase of assets
or business from another person, so long as the Company is the
surviving corporation and that such transaction is not primarily for
the purpose of raising capital, or (vi) in connection with the
issuance of Common Stock, not in excess of 1% of the Common Stock
issued and outstanding on the original issue date of this Warrant,
upon the exercise of warrants or other rights granted to any bank
other commercial financing institution, for a consideration per
share less than both (x) the market price at the time of such
issuance or distribution and (y) an Adjustment Price previously used
in calculating the vesting of Warrant Shares on previous Vesting
Date (such an issuance, a "Discounted Issuance"), then the
Adjustment Price previously used in calculating the vesting of
Warrant Shares on any previous Vesting Date (if greater than such
issuance price) shall equal the consideration per share at which
such Discounted Issuance was
-10-
made and the Company shall, within ten (10) Trading Days of such
Discounted Issuance, issue to the Holder a number of shares of
Common Stock equal to the difference between the number of Warrant
Shares vested on any previous applicable Vesting Date based on the
Adjusted Price then in effect and the number of Warrant Shares which
would have vested on such previous Vesting Dates based on the
imputed Adjustment Price pursuant to the Discounted Issuance. Such
adjustment shall be made successively whenever such an issuance is
made.
(e) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company (on a book value basis) in one
or a series of related transactions, or (3) tender or other offer or
exchange (whether by the Company or another Person) pursuant to
which holders of Common Stock are permitted to tender or exchange
their shares for other securities, stock, cash or property of the
Company or another Person; then the Holder shall have the right
thereafter to (A) exercise this Warrant for the shares of stock and
other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such merger, consolidation
or sale, and the Holder shall be entitled upon such event or series
of related events to receive such amount of securities, cash and
property as the shares of Common Stock for which this Warrant could
have been exercised immediately prior to such merger, consolidation
or sales would have been entitled, (B) in the case of a merger or
consolidation, require the surviving entity to issue to the Holder a
warrant entitling the Holder to acquire shares of such entity's
common stock, which warrant shall have terms identical (including
with respect to exercise) to the terms of this Warrant and shall be
entitled to all of the rights and privileges set forth herein and
the agreements pursuant to which this Warrant was issued (including,
without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock
other securities issuable upon exercise thereof), or (C) in the
event of an exchange or tender offer or other transaction
contemplated by clause (3) of this Section, tender or exchange this
Warrant for such securities, stock, cash and other property
receivable upon or deemed to be held by holders of Common Stock that
have tendered or exchanged their shares of Common Stock following
such tender or exchange, and the Holder shall be entitled upon such
exchange or tender to receive such amount of securities, cash and
property as the shares of Common Stock for which this Warrant could
have been exercised immediately prior to such tender or exchange
would have been entitled as would have been issued. In the case of
clause (B), the exercise price applicable for the newly issued
warrant shall be based upon the amount of securities, cash and
property that each share of Common Stock would receive in such
transaction and the Exercise Price immediately prior to the
effectiveness or closing date for such transaction. The terms of any
such merger, sale, consolidation, tender or exchange shall include
such terms so as continue to give the
-11-
Holder the right to receive the securities, cash and property set
forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such
events.
(f) For the purposes of this Section 9, the following clauses shall also
be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in
Common Stock or in securities convertible or exchangeable into
shares of Common Stock, or (B) to subscribe for or purchase
Common Stock or securities convertible or exchangeable into
shares of Common Stock, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. 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.
(g) All calculations under this Section shall be made to the nearest
1/100th of a share.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend
on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common
Stock of the Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any
-12-
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in one
of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available funds;
or
(b) Cashless Exercise. The Holder shall surrender this Warrant to the
Company together with a notice of cashless exercise, in which event
the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the closing sale prices of the Common Stock
on the principal market or exchange in which the Common Stock
is then listed or traded, as reported by Bloomberg Information
Systems, Inc. (or any successor to its function of reporting
stock prices), for the five (5) trading days immediately prior
to (but not including) the Date of Exercise.
-13-
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act of 1934 (the "Exchange Act") and the rules promulgated thereunder)
in excess of 4.999% of the then issued and outstanding shares of Common Stock,
including shares of Common Stock issuable upon such exercise and held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of an exercise hereunder, unless the exercise at issue would result in the
issuance of shares of Common Stock in excess of 4.999% of the then outstanding
shares of Common Stock without regard to any other shares of Common Stock which
may be beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular exercise hereunder and to
the extent that the Holder determines that the limitation contained in this
Section applies, the determination of which portion of this Warrant is
exercisable shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Form of Election to Purchase for a number of Warrant
Shares that would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
exercise for the maximum portion of this Warrant permitted to be exercised on
such Date of Exercise in accordance with the periods described herein and
disregard the balance of such Form of Election to Purchase, as if never
delivered The provisions of this Section may be waived by a Holder (but only as
to itself and not to any other Holder) upon not less than 61 days' prior notice
to the Company. Other Holders shall be unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares of Common
Stock issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares of Common Stock which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of
-14-
which portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall honor the exercise for the maximum portion of this Warrant
permitted to be exercised on such Date of Exercise in accordance with the
periods described herein and disregard the balance of such Form of Election to
Purchase, as if never delivered The provisions of this Section may be waived by
a Holder (but only as to itself and not to any other Holder) upon not less than
61 days' prior notice to the Company. Other Holders shall be unaffected by any
such waiver.
(c) If the Company Stock is then listed for trading on the Nasdaq or
the Nasdaq National Market and the Company has not obtained the Shareholder
Approval (as defined below), then the Company may not issue, upon exercise of
this Warrant, in excess of a number of shares of Common Stock (the "Issuable
Maximum") equal to 879,683 shares of Common Stock less 1/3 of the number of
shares of Common Stock previously issued or issuable upon exercise of any of the
Company's adjustable warrants dated June 24, 1999 and numbered SR-1, BH-1 and
AS-1 (the "Prior Adjustable Warrants"). The 879,683 shares of Common Stock
equals 19.999% of the number of shares of Common Stock outstanding immediately
prior to the issuance of the Prior Adjustable Warrants multiplied by the
quotient obtained by dividing (x) the number of shares of Common Stock issued
and sold to the original Holder on the Closing Date by (y) the number of shares
of Common Stock issued and sold by the Company on the Closing Date. If on any
Date of Exercise (A) the Company Stock is listed for trading on the Nasdaq or
the Nasdaq National Market, (B) the Exercise Price then in effect is such that
the aggregate number of shares of Common Stock that would then be issuable upon
exercise in full of this Warrant, together with any shares of Common Stock
previously issued upon exercise of this Warrant, would equal or exceed the
Issuable Maximum, and (C) the Company shall not have previously obtained the
vote of shareholders, if any, as may be required by the applicable rules and
regulations of the Nasdaq Stock Market to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms hereof (the
"Shareholder Approval"), then the Company shall issue to the Holder a number of
shares of Common Stock equal to the Issuable Maximum and, with respect to the
shares whose issuance would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum (the "Excess Warrant Shares"), the Holder shall
have the option to require the Company to either (1) use its best efforts to
obtain the Shareholder Approval applicable to such issuance as soon as possible,
but, in any event, no later than 60 days after such request or (2) pay to the
Holder an amount in cash equal to the product of (x) the Excess Warrant Shares
multiplied by (y) the closing sales price of the Common Stock on (a) the date
such Shareholder Approval was required to have been obtained or (b) the Date of
Exercise giving rise to the obligation to seek Shareholder Approval (whichever
is greater) (such amount, the "Cash Payment"). If the Holder shall require the
Company to use its best efforts to obtain the Shareholder Approval pursuant to
the immediately preceding sentence and the Company shall have failed to obtain
such Shareholder Approval on or prior to the 60th day following such request
(such date, the "Target Date"), the Company shall pay to the Holder the Cash
Payment no later than the 5th day following the Target Date. If the Company
fails to pay the Cash Payment in full pursuant to this Section within seven (7)
days after the date payable, the Company will pay interest on such amount at a
rate of 18% per annum, or such lesser maximum amount that is permitted to be
paid by
-15-
applicable law, to the Holder, accruing daily from the date payable until such
amount, plus all such interest thereon, is paid in full. The Company and the
Holder understand and agree that shares of Common Stock issued upon exercise of
the Warrant and then held by the Holder or an Affiliate thereof may not cast
votes or be deemed outstanding for purposes of any vote to obtain the
Shareholder Approval.
12. Fractional Shares. The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of this Warrant so presented. If
any fraction of a Warrant Share would, except for the provisions of this
Section 12, be issuable on the exercise of this Warrant, the Company shall
pay an amount in cash equal to the Exercise Price multiplied by such
fraction.
13. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on
the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 6:30 p.m. (New York City time) on a
Business Day, (ii) the Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 6:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent
by nationally recognized overnight courier service with next day delivery
specified thereon, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The addresses for such communications
shall be: (i) if to the Company, to 00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000,
Xxx Xxxxxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000, attention
Chief Financial Officer, or (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such
other address or facsimile number as the Holder may provide to the Company
in accordance with this Section 13.
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent.
(b) Any corporation into which the Company or any new warrant agent may
be merged or any corporation resulting from any consolidation to
which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services
business shall be a successor warrant agent under this Warrant
without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the
Holder's last address as shown on the Warrant Register.
-16-
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause
under this Warrant. This Warrant shall inure to the sole and
exclusive benefit of the Company and the Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant
shall not in any way be affected or impaired thereby and the parties
will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF XXXX INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-17-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FIDELITY HOLDINGS, INC.
By: /s/ Xxxxx Xxxxx
-------------------
Name: Xxxxx Xxxxx
-----------------
Title: President
----------------
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Fidelity Holdings, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Fidelity
Holdings, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
----------------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Dated: _________________, ____ Name of Holder:
(Print) ________________________________
(By:) __________________________________
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Fidelity Holdings,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Fidelity Holdings, Inc. with full power
of substitution in the premises.
Dated: _________________, ____
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
----------------------------------------
Address of Transferee
----------------------------------------
----------------------------------------
In the presence of:
--------------------------
Exhibit A
(i) "Adjustment Price" means the average of the ten (10) lowest Per
Share Market Values (which need not occur on consecutive Trading
Days) during the forty (40) Trading Days immediately preceding
either a (i) Vesting Date or (ii) Trading Day, as applicable.
(ii) "Applicable Share Number" means (i) with respect to the First
Vesting Date, 34% of the number of shares of Common Stock purchased
by the Holder pursuant to the Purchase Agreement and (ii) with
respect to each of the Second Vesting Date and the Third Vesting
Date, 33% of the number of shares of Common Stock purchased by the
Holder pursuant to the Purchase Agreement.
(iii) "Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
(iv) "Change of Control Transaction" means the occurrence of any of (1)
an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal
or beneficial ownership of capital stock of the Company, by contract
or otherwise) of in excess of 33.33% of the voting securities of the
Company, (2) a replacement at one time or over time of more than
one-half of the members of the Board which is not approved by a
majority of those individuals who are members of the Board on the
date of issuance of this Warrant (or by those individuals who are
serving as members of the Board on any date whose nomination to the
Board was approved by a majority of the members of the Board who are
members on the date of issuance of this Warrant), (3) the merger of
the Company with or into another entity where the directors
comprising the Board immediately prior to such transaction (or the
first to occur of any series of related transactions) do not
comprise a majority of the members of the board of directors of the
surviving company immediately following such transaction, (4) the
merger of the Company with or into another entity where the
shareholders of the Company immediately prior to such transaction
(or the first to occur of any series of related transactions) do not
collectively own in excess of 66.66% of the outstanding voting
securities of the surviving company immediately following such
transaction, (5) the sale of all or substantially all of the assets
of the Company in one or a series of related transactions, (6) the
merger by the Company with or into another entity where the voting
securities of the surviving company are not listed or quoted for
trading on the Nasdaq or on a Subsequent Market, or (7) the
execution by the Company of an agreement providing for any of the
events set forth above in (1) - (6).
(v) "Commission" means the Securities and Exchange Commission.
(vi) "Effectiveness Date" means the date the Underlying Shares
Registration Statement is declared effective by the Commission.
(vii) "Effectiveness Required Date" means the 120th day following the date
of issuance of this Warrant.
(viii) "Nasdaq" means the Nasdaq National Market.
(ix) "Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the
Nasdaq or on any Subsequent Market, or if there is no such price on
such date, then the closing bid price on the Nasdaq or on such
Subsequent Market on the date nearest preceding such date, or (b) if
the Common Stock is not then listed or quoted on the Nasdaq or a
Subsequent Market, the closing bid price for a share of Common Stock
in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of
business on such date, or (c) if the Common Stock is not then
reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the
relevant conversion period, as determined in good faith by the
Holder, or (d) if the Common Stock is not then publicly traded the
fair market value of a share of Common Stock as determined by an
appraiser selected in good faith by the Holders of a majority of the
applicable Warrant Shares.
(x) "Purchase Agreement" means the Securities Purchase Agreement dated
as of the date hereof, between the Company and the original Holder
hereof.
(xi) "Purchase Price" means $17.00.
(xii) "Securities" shall have the meaning set forth in the Purchase
Agreement.
(xiii) "Subsequent Market" shall mean any of the New York Stock Exchange,
Inc., American Stock Exchange, Inc. or Nasdaq SmallCap Market.
(xiv) "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or on the Subsequent Market on which the Common Stock is
then listed or quoted, as the case may be, or (b) if the Common
Stock s not listed on the Nasdaq or on a Subsequent Market, a day on
which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board, or (c) if the Common Stock is
not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization
or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or
quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean a Business Day.
(xv) "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
(xvi) "Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration
Rights Agreement dated as of the date hereof between the Company and
the original Holder hereof (the "Registration Rights Agreement") and
covering the resale of the Registrable Securities by the selling
stockholders thereunder.
