EXHIBIT NO. 4.3
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS 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, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
SERIES B COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
ON2 TECHNOLOGIES, INC.
THIS SERIES B COMMON STOCK PURCHASE WARRANT (the "Warrant")
certifies that, for value received, _____________ (the "Holder"), is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the "Initial
Exercise Date") and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the "Termination Date") but not
thereafter, to subscribe for and purchase from ON2 Technologies, Inc., a
Delaware corporation (the "Company"), up to ______ shares (the "Warrant Shares")
of Common Stock, par value $0.01 per share, of the Company (the "Common Stock").
The purchase price of one share of Common Stock under this Warrant shall be
equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated October __, 2004, among the
Company and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination Date
by delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto (or such other office or agency
of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books
of the Company); provided, however, within 5 Trading Days of the date
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said Notice of Exercise is delivered to the Company, the Holder shall
have surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier's check drawn on a United States
bank.
b) Exercise Price. The exercise price of the Common Stock under
this Warrant shall be $0.76, subject to adjustment hereunder (the
"Exercise Price").
c) Cashless Exercise. If at any time after one year from the
date of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the Holder,
then this Warrant may also be exercised at such time by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the
date of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant
by means of a cash exercise rather than a cashless
exercise.
d) Exercise Limitations.
i. Holder's Restrictions. The Holder shall not have the
right to exercise any portion of this Warrant, pursuant to
Section 2(c) or otherwise, to the extent that after giving
effect to such issuance after exercise, the Holder (together
with the Holder's affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such
issuance. For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder
and its affiliates shall include the number of shares of
Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being
made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by
the Holder or any of its affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without
limitation, any other Preferred Stock or Warrants) subject
to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder
or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act, it being acknowledged by
Holder that the Company is not representing to Holder that
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such calculation is in compliance with Section 13(d) of the
Exchange Act and Holder is solely responsible for any
schedules required to be filed in accordance therewith. To
the extent that the limitation contained in this Section
2(d) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of such Xxxxxx,
and the submission of a Notice of Exercise shall be deemed
to be such Holder's determination of whether this Warrant is
exercisable (in relation to other securities owned by such
Holder) and of which portion of this Warrant is exercisable,
in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For
purposes of this Section 2(d), in determining the number of
outstanding shares of Common Stock, the Holder may rely on
the number of outstanding shares of Common Stock as
reflected in (x) the Company's most recent Form 10-QSB or
Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the
Company or the Company's Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the
written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its affiliates
since the date as of which such number of outstanding shares
of Common Stock was reported. The provisions of this Section
2(d) may be waived by the Holder upon, at the election of
the Holder, not less than 61 days' prior notice to the
Company, and the provisions of this Section 2(d) shall
continue to apply until such 61st day (or such later date,
as determined by the Holder, as may be specified in such
notice of waiver).
ii. Trading Market Restrictions. If the Company has not
obtained Shareholder Approval (as defined below) if
required, then the Company may not issue upon exercise of
this Warrant in the aggregate, in excess of 19.999% of the
number of shares of Common Stock outstanding on the Trading
Day immediately preceding the Closing Date, less any shares
of Common Stock issued upon conversion of or as payment of
dividends on the Preferred Stock or upon prior exercise of
this or any other Warrant issued pursuant to the Purchase
Agreement (such number of shares, the "Issuable Maximum").
If on any attempted exercise of this Warrant, the issuance
of Warrant Shares would exceed the Issuable Maximum and the
Company shall not have previously obtained the vote of
shareholders (the "Shareholder Approval"), if any, as may be
required by the applicable rules and regulations of the
Trading Market (or any successor entity) to approve the
issuance of shares of Common Stock in excess of the Issuable
Maximum pursuant to the terms hereof, then the Company shall
issue to the Holder requesting a Warrant exercise such
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number of Warrant Shares as may be issued below the Issuable
Maximum and, with respect to the remainder of the aggregate
number of Warrant Shares, this Warrant shall not be
exercisable until and unless Shareholder Approval has been
obtained.
e) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company covenants
that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by
this Warrant, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect
of any transfer occurring contemporaneously with such
issue). The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the
Trading Market upon which the Common Stock may be listed.
ii. Delivery of Certificates Upon Exercise. Certificates
for shares purchased hereunder shall be transmitted by the
transfer agent of the Company to the Holder by crediting the
account of the Holder's prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent
Commission ("DWAC") system if the Company is a participant
in such system, and otherwise by physical delivery to the
address specified by the Holder in the Notice of Exercise
within 3 Trading Days from the delivery to the Company of
the Notice of Exercise Form, surrender of this Warrant and
payment of the aggregate Exercise Price as set forth above
("Warrant Share Delivery Date"). This Warrant shall be
deemed to have been exercised on the date the Exercise Price
is received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes,
as of the date the Warrant has been exercised by delivery to
the Company of the Notice of Exercise Form and by payment to
the Company of the Exercise Price and all taxes required to
be paid by the Holder, if any, pursuant to Section 2(e)(vii)
prior to the issuance of such shares, have been paid.
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iii. Delivery of New Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder
a new Warrant evidencing the rights of Holder to purchase
the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical
with this Warrant.
iv. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to
this Section 2(e)(iv) by the Warrant Share Delivery Date,
then the Holder will have the right to rescind such
exercise.
v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise. In addition to any other rights
available to the Holder, if the Company fails to cause its
transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and
if after such date the Holder is required by its broker to
purchase (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 anticipated
receiving upon such exercise (a "Buy-In"), then the Company
shall (1) pay in cash to 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 amount obtained by multiplying (A)
the number of Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise at
issue times (B) the price at which the sell order giving
rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored or 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 hereunder. 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 an aggregate sale
price giving rise to such purchase obligation 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,
together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall
limit a Holder's right to pursue any other remedies
available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to
timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant as required pursuant to
the terms hereof.
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vi. No Fractional Shares or Scrip. No fractional shares
or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share
which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price.
vii. Charges, Taxes and Expenses. Issuance of
certificates for Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in the
name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto.
viii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents
the timely exercise of this Warrant, pursuant to the terms
hereof.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant), (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted. Any adjustment made pursuant to
this Section 3(a) 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, combination or re-classification.
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b) Subsequent Equity Sales. If the Company or any Subsidiary thereof,
as applicable, at any time while this Warrant is outstanding, shall offer, sell,
grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Exercise Price (such lower price,
the "Base Share Price" and such issuances collectively, a "Dilutive Issuance"),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price),
then, the Exercise Price shall be reduced by multiplying the Exercise Price by a
fraction, the numerator of which is the number of shares of Common Stock issued
and outstanding immediately prior to the Dilutive Issuance plus the number of
shares of Common Stock which the offering price for such Dilutive Issuance would
purchase at the then Exercise Price, and the denominator of which shall be the
sum of the number of shares of Common Stock issued and outstanding immediately
prior to the Dilutive Issuance plus the number of shares of Common Stock so
issued or issuable in connection with the Dilutive Issuance, the number of
Warrant Shares issuable hereunder shall be increased such that the aggregate
Exercise Price payable hereunder, after taking into account the decrease in the
Exercise Price, shall be equal to the aggregate Exercise Price prior to such
adjustment. Such adjustments shall be made whenever such Common Stock or Common
Stock Equivalents are issued. The Company shall notify the Holder in writing, no
later than the Trading Day following the issuance of any Common Stock or Common
Stock Equivalents subject to this section, indicating therein the applicable
issuance price, or of applicable reset price, exchange price, conversion price
and other pricing terms (such notice the "Dilutive Issuance Notice"). For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price in
the Notice of Exercise.
c) Pro Rata Distributions. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security other than the Common Stock
(which shall be subject to Section 3(b)), then in each such case the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then per share fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness
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so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned above.
d) Calculations. All calculations under this Section 3 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be. The
number of shares of Common Stock outstanding at any given time shall not
includes shares of Common Stock owned or held by or for the account of the
Company, and the description of any such shares of Common Stock shall be
considered on issue or sale of Common Stock. For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
e) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to this Section 3, the Company shall promptly mail
to each Holder a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate
security, despite the prohibition thereon in the Purchase Agreement,
the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the
case of a Variable Rate Transaction (as defined in the Purchase
Agreement), or the lowest possible adjustment price in the case of
an MFN Transaction (as defined in the Purchase Agreement.
ii. Notice to Allow Exercise by Xxxxxx. If (A) the Company
shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) 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; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, 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, of any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall
cause to be mailed to the Holder at its last addresses as it shall
appear upon the Warrant Register of the Company, at least 20
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
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dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the
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 the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange; provided, 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. The Holder is entitled to
exercise this Warrant during the 20-day period commencing the date
of such notice to the effective date of the event triggering such
notice.
f) Fundamental Transaction. If, at any time while this Warrant
is outstanding, (A) the Company effects any merger or consolidation
of the Company with or into another Person, (B) the Company effects
any sale of all or substantially all of its assets in one or a
series of related transactions, (C) any tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property (in any such case, a "Fundamental Transaction"), then,
upon any subsequent conversion of this Warrant, the Holder shall
have the right to receive, for each Warrant Share that would have
been issuable upon such exercise absent such Fundamental
Transaction, at the option of the Holder, (a) upon exercise of this
Warrant, the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving
corporation, and Alternate Consideration receivable upon or as a
result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of
shares of Common Stock for which this Warrant is exercisable
immediately prior to such event or (b) cash equal to the value of
this Warrant as determined in accordance with the Black-Scholes
option pricing formula (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 Fundamental 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 Fundamental 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 Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the
Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder's right to
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exercise such warrant into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to
comply with the provisions of this paragraph (f) and insuring that this
Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
g) Exempt Issuance. Notwithstanding the foregoing, no
adjustments, Alternate Consideration nor notices shall be made, paid or
issued under this Section 3 in respect of an Exempt Issuance.
h) Voluntary Adjustment By Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price
to any amount and for any period of time deemed appropriate by the
Board of Directors of the Company.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
c) Warrant Register. 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,
absent actual notice to the contrary.
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d) Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the
transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under
applicable state securities or blue sky laws, the Company may require,
as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions)
to the effect that such transfer may be made without registration under
the Securities Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the
Company and (iii) that the transferee be an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a) under the Securities Act.
Section 5. Miscellaneous.
a) Title to Warrant. Prior to the Termination Date and subject
to compliance with applicable laws and Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part,
at the office or agency of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with
the Assignment Form annexed hereto properly endorsed. The transferee
shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the
surrender of this Warrant and the payment of the aggregate Exercise
Price (or by means of a cashless exercise), the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
c) Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal
holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
11
e) Authorized Shares.
The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the
purchase rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth
in this Warrant against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any
Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares
upon the exercise of this Warrant, and (c) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Warrant.
Before taking any action which would result in an adjustment in
the number of Warrant Shares for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction thereof.
f) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
g) Restrictions. The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal
securities laws.
12
h) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's
rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
i) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
j) Limitation of Liability. No provision hereof, in the absence
of any affirmative action by Holder to exercise this Warrant or
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by
creditors of the Company.
k) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The
Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
l) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the
Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by
any such Holder or holder of Warrant Shares.
m) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holder.
n) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall
be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
o) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: October __, 2004
ON2 TECHNOLOGIES, INC.
By:__________________________________________
Name:
Title:
NOTICE OF EXERCISE
To: ON2 Technologies, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares
of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares
as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant
with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
The Warrant Shares shall be delivered to the following:
----------------------------------------
----------------------------------------
----------------------------------------
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
