Exhibit 10.4
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER
AND AN OPINION OF COUNSEL REASONABLE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED.
THIS SECURITY, AND THE SHARES ISSUABLE UPON EXERCISE HEREOF, ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND IN
THE SHAREHOLDERS AGREEMENT DATED AS OF MAY 1, 1998 (A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER HEREOF). NO
REGISTRATION OF TRANSFER OF SUCH SECURITY OR SHARES WILL BE MADE
ON THE BOOKS OF THE ISSUER AND NO SHARES SHALL BE ISSUED TO ANY
PERSON OTHER THAN THE REGISTERED HOLDER OF THIS SECURITY UNLESS
AND UNTIL ALL APPLICABLE RESTRICTIONS ON TRANSFER CONTAINED IN
SUCH SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
STOCK PURCHASE WARRANT
` ----------------------
Date of Issuance: May 1, 1998 Certificate No. 2
For value received, CHADMOORE WIRELESS GROUP, INC., a Colorado
corporation (the "Company"), hereby grants to RECOVERY EQUITY INVESTORS II,
L.P., a Delaware limited partnership, or its registered assigns (the "Registered
Holder"), the right to purchase from the Company, at any time or from time to
time during the Exercise Period, 14,612,796 Warrant Shares at the Exercise
Price. This Warrant is issued to REI on the Date of Issuance pursuant to the
Investment Agreement. The Exercise Price and number of Warrant Shares (and the
amount and kind of other securities) for which this Warrant is exercisable shall
be subject to adjustment as provided herein. Certain capitalized terms used
herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Rights. Prior to the tenth anniversary of the Date of
Issuance, the number of Warrants Shares with respect to which this Warrant may
be exercised shall not exceed, at the time of any exercise hereof (together with
all shares of Common Stock acquired pursuant to previous exercises hereunder)
three-quarters of the total number of shares of Common Stock which have been
issued upon the conversion, exchange or exercise, as applicable, of the
Convertible Securities, the Floating Price Securities and the Options from the
Date of Issuance through the Exercise Time (as hereinafter defined). From the
tenth anniversary through and including the eleventh anniversary of the Date of
Issuance, the purchase rights represented by this Warrant may be exercised, in
whole or in part, for all Warrant Shares then issuable hereunder.
1B. Exercise Period. Subject to Section 1A, the purchase rights
represented by this Warrant may be exercised, in whole or in part, at any time
and from time to time, commencing on the Date of Issuance through 5:00 p.m.,
Nevada time, on the eleventh anniversary of the Date of Issuance, or, if such
day is not a Business Day, on the next succeeding Business Day (the "Exercise
Period").
1C. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when all
of the following items have been delivered to the Company (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 1C below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) either (i) a check or wire transfer payable to the
Company in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares being purchased upon such exercise (the
"Aggregate Exercise Price"), (ii) the surrender to the Company of debt
or equity securities or a combination of debt and equity securities of
the Company or any of its direct or indirect subsidiaries having a value
equal to the Aggregate Exercise Price of the Warrant Shares being
purchased upon such exercise (which value in the case of debt securities
or any preferred stock shall be deemed to equal the aggregate
outstanding principal amount or liquidation value thereof plus all
accrued and unpaid interest thereon or accrued or declared and unpaid
dividends thereon and in the case of shares of Common Stock shall be the
Fair Market Value thereof) or (iii) the delivery of a
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notice to the Company that the Purchaser is exercising the Warrant (or
portion thereof) by authorizing the Company to reduce the number of
Warrant Shares to be delivered to Purchaser upon such exercise of the
Warrant or portion thereof by the number of Warrant Shares having an
aggregate Fair Market Value determined as of the date immediately prior
to the date of the Exercise Time equal to the Aggregate Exercise Price.
(ii) Certificates for Warrant Shares (including, without
limitation, fractional shares) purchased upon exercise of this Warrant shall be
delivered by the Company to the Purchaser within three Business Days after the
date of the Exercise Time. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the Company shall
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised
and shall, within such three Business Day period, deliver such new Warrant to
the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
Registered Holder of such Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance tax in respect thereof or other cost incurred
by the Company in connection with such exercise and the related issuance of
Warrant Shares; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance of any Warrants or any certificates representing Warrant Shares in a
name other than that of a Registered Holder, and the Company shall not be
required to issue or deliver such Warrant or certificate for Warrant Shares
unless and until the Person 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.
(v) The Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share, if any, of the unissued
Warrant Shares acquirable upon exercise of this Warrant is at all times equal to
or less than the Exercise Price then in effect. In the event that the Company
fails to comply with its obligations set forth in the foregoing sentence, in
addition to all other rights which the Registered Holder or Purchaser may have
at law or in equity, the Purchaser may (but shall not be obligated to) purchase
Warrant Shares hereunder at par value, and the Company shall be obligated to
reimburse the Purchaser for the aggregate amount of consideration paid in
connection with such exercise in excess of the Exercise Price then in effect.
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(vi) The Company shall assist and cooperate with any reasonable
request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a public
offering or a sale of the Company (pursuant to a merger, sale of stock, sale of
assets or otherwise), then such exercise may at the election of the Registered
Holder be conditioned upon the consummation of such transaction, in which case
such exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued Warrant Shares and solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant. All Warrant Shares which are so
issuable shall, when issued and upon the payment of the applicable Exercise
Price, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Company shall take all such actions as may be
necessary to ensure that all such Warrant Shares may be so issued without
violation by the Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock or other securities constituting Warrant Shares may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance) or any violation by the Company of any agreement to
which the Company or any of its assets or properties may be subject. The Company
will cause the Warrant Shares, immediately upon such exercise, to be listed on
each domestic securities exchange or quotation system upon which shares of
Common Stock or other securities constituting Warrant Shares are listed or
quoted at the time of such exercise.
(ix) If the Warrant Shares issuable by reason of exercise of this
Warrant are convertible into or exchangeable for any other stock or securities,
then the Company shall, at the Purchaser's option and upon surrender of this
Warrant by such Purchaser as provided above together with any notice, statement
or payment required to effect such conversion or exchange of Warrant Shares,
deliver to such Purchaser (or as otherwise specified by such Purchaser) a
certificate or certificates representing the stock or securities into which the
Warrant Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1D. Exercise Agreement. Upon any exercise of this Warrant, the Purchaser
shall deliver to the Company an Exercise Agreement in substantially the form set
forth in Exhibit I hereto, except that if the Warrant Shares are not to be
issued in the name of the Registered Holder, the Exercise Agreement shall also
state the name of the Person to whom the certificates
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for the Warrant Shares are to be issued, and if the number of Warrant Shares to
be issued does not include all of the Warrant Shares purchasable hereunder, it
shall also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order
to prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment upon Certain Issuances of Common Stock.
(i) Issuance of Floating Price Securities at Less than the Deemed
Issue Price. If and whenever, on or after the Date of Issuance, the Company
issues any shares of Common Stock upon exercise or conversion of any Floating
Price Securities for a consideration per share less than the Deemed Issue Price,
then immediately upon such issuance, the number of Warrant Shares acquirable
hereunder shall be increased by three shares (rounded up to the nearest whole
share) for each additional four shares of Common Stock which are issued with
respect to such Floating Price Security (with such additional shares being equal
to the difference between the number of shares of Common Stock which are issued
with respect to such Floating Price Security and the number of shares of Common
Stock which would have been issued with respect to such Floating Price Security
at the Deemed Issue Price).
(ii) Issuance of Floating Price Securities at Greater than the
Deemed Issue Price. If and whenever, on or after the Date of Issuance, the
Company issues any shares of Common Stock upon exercise or conversion of any
Floating Price Securities for a consideration per share greater than the Deemed
Issue Price, then immediately upon such issuance, the number of Warrant Shares
acquirable hereunder shall be reduced by three shares (rounded down to the
nearest whole share) for each fewer four shares of Common Stock issued which are
issued with respect to such Floating Price Security (with such fewer shares
being equal to the difference between the number of shares of Common Stock which
would have been issued with respect to such Floating Price Security at the
Deemed Issue Price and the number of shares of Common Stock which are issued
with respect to such Floating Price Security). In no event shall any adjustment
be made which would result in the number of Warrant Shares issuable hereunder
being less than zero.
2B. Adjustment upon Expiration of Options. If and whenever, on or after
the Date of Issuance and prior to the tenth anniversary of the Date of Issuance
any Option expires unexercised, the number of Warrant Shares acquirable
hereunder shall be reduced by three quarters of a share (rounded down to the
nearest whole share) for each one share of Common Stock with respect to which
such Option remained unexercised. In no event shall any adjustment
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be made which would result in the number of Warrant Shares issuable hereunder
being less than zero.
2C. Adjustment upon Payment or Cancellation of Convertible Securities.
If and whenever, on or after the Date of Issuance and prior to the tenth
anniversary of the Date of Issuance all amounts due with respect to any
Convertible Security are satisfied in full or the right to convert or exchange a
Convertible Security is canceled, the number of Warrant Shares acquirable
hereunder shall be reduced by three quarters of a share (rounded down to the
nearest whole share) for each one share of Common Stock which could have been
issued with respect to such Convertible Security. In no event shall any
adjustment be made which would result in the number of Warrant Shares issuable
hereunder being less than zero.
2D. Adjustment upon Payment or Expiration of Floating Price Securities.
Without duplication of any adjustment pursuant to Section 2A(i) or 2A(ii) above,
if and whenever, on or after the Date of Issuance and prior to the tenth
anniversary of the Date of Issuance all amounts due with respect to a Floating
Price Security are satisfied in full or the right to convert or exchange a
Floating Price Security is canceled, the number of Warrant Shares acquirable
hereunder shall be reduced by three quarters of a share (rounded down to the
nearest whole share) for each one share of Common Stock which could have been
issued with respect to such Floating Price Security. In no event shall any
adjustment be made which would result in the number of Warrant Shares issuable
hereunder being less than zero.
2E. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, then the Exercise Price and the Deemed Issue Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency), as the case may be, shall be
proportionately increased. If the Company at any time combines (by reverse stock
split or otherwise) the Common Stock into a smaller number of shares, then the
Exercise Price and the Deemed Issue Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant (whether or not then acquirable or
subject to a contingency), as the case may be, shall be proportionately
decreased.
2F. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change". Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the Required
Holders) to ensure that such Registered Holder shall thereafter have the right
to acquire and receive upon exercise thereof, in lieu of or addition to (as
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the case may be) the Warrant Shares immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrants (whether or not
then acquirable or subject to a contingency), such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable
(whether or not then acquirable or subject to a contingency) upon exercise of
such Registered Holder's Warrants had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Required Holders) with respect to such Registered
Holder's rights and interests to insure that the provisions hereof (including,
without limitation, Sections 2, 3 and 4) shall thereafter be applicable to the
Warrants (including, without limitation, in the case of any such Organic Change
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the product of the Exercise Price
immediately prior to such Organic Change multiplied by the ratio of such value
of the Common Stock reflected by the terms of such Organic Change divided by the
Fair Market Value of the Common Stock in effect immediately prior to such
Organic Change and a corresponding immediate adjustment to the number of Warrant
Shares acquirable and receivable upon exercise of the Warrants (whether or not
then acquirable or subject to a contingency), if the value so reflected is less
than the Fair Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such Organic Change
unless, prior to the consummation thereof, the successor entity (if other than
the Company) resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument (in form
and substance satisfactory to the Required Holders) the obligation to deliver to
such Registered Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Registered Holder may be entitled
to acquire upon exercise of Warrants.
2G. Certain Adjustments to Identified Securities. Without duplication of
any adjustment pursuant to Section 2A, 2E or 2F above, if and whenever, on or
after the Date of Issuance, the number of shares of Common Stock issuable with
respect to any Identified Security increases, the number of Warrant Shares
acquirable hereunder shall be increased by one-half share for each additional
one share (rounded up to the nearest whole share) so issuable with respect to
such Identified Security.
2H. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price, the Deemed Issue Price and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency) so as to protect the rights of
the Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof.
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2I. Notices.
(i) Immediately upon any adjustment of the number of Warrant
Shares or the Exercise Price, the Company shall give written notice thereof to
the Registered Holder, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 30 days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock, or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. Purchase Rights. If at any time the Company grants, issues or
sells any rights or options to subscribe for or to purchase (including, without
limitation, the issuance of any notes or other debt instruments convertible into
or payable in) Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (including without limitation convertible common
stock) or rights to purchase stock, warrants, securities or other property
(other than pursuant to a Permitted Issuance) pro rata to the record holders of
the Common Stock which is also granted, issued or sold (whether or not
immediately or subject to a contingency) to the holders of, or adjusts in any
way, any of the Identified Securities (the "Purchase Rights"), then the
Registered Holder shall be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Registered Holder
would have acquired if such Registered Holder had held the maximum number of
Warrant Shares acquirable (whether or not then acquirable or subject to a
contingency) upon complete exercise of this Warrant immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
SECTION 4. Definitions. The following terms have the meanings set forth
below:
"Aggregate Exercise Price" has the meaning ascribed to it in Section
1B(i)(d).
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New York, Nevada or California are
authorized or obligated to close.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company, any securities into which such Common Stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right,
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without limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
"Company" has the meaning ascribed to it in the first paragraph of this
Warrant.
"Convertible Securities" means the securities listed in Section 1 of
Attachment A hereto.
"Date of Issuance" means May 1, 1998, the date the Company initially
issues this Warrant regardless of the number of times new certificates
representing the unexpired and unexercised rights formerly represented by this
Warrant shall be issued.
"Deemed Issue Price" means $0.50, as such price may be adjusted from
time to time pursuant to Section 2 hereof.
"Exercise Period" has the meaning ascribed to it in Section 1B.
"Exercise Price" means $0.001 for each Warrant Share as such price may
be adjusted from time to time pursuant to Section 2 hereof.
"Exercise Time" has the meaning ascribed to it in Section 1C(i).
"Fair Market Value" means, with respect to each share of Common Stock as
of a particular date (i) the average of the closing sales prices on such date of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 P.M., New York time, as reported
on the Nasdaq National Market, in each such case averaged over a period of 40
trading days consisting of the day before "Fair Market Value" is being
determined and the immediately prior 39 trading days prior to such day during
which the Common Stock was traded. Notwithstanding the foregoing, if at any time
of determination either (x) the Common Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and either listed
on a national securities exchange or authorized for quotation in the Nasdaq
National Market, or (y) less than 25% of the outstanding Common Stock is held by
the public free of transfer restrictions under the Securities Act of 1933, as
amended, then Fair Market Value shall mean the price that would be paid per
share for the entire common equity interest in the Company in an orderly sale
transaction between a willing buyer and a willing seller, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale, without discount for lack of liquidity, or minority
position. Fair Market Value shall be determined jointly by the Company's Board
of Directors in its good faith judgment and the Required Holders. If such
parties are unable to agree as to such a joint determination of Fair Market
Value within 15 days of notice by one party to the other of the
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necessity of calculating Fair Market Value for purposes of this Warrant, then,
such value shall be determined by an independent investment banking or appraisal
firm mutually acceptable to the Company and the Required Holders. If the
Required Holders and the Company are unable to agree upon an independent
investment banking or appraisal firm, then the Required Holders shall select one
such independent investment banking or appraisal firm and the Company shall
select another such firm, and the calculation of Fair Market Value shall be made
by a third such independent investment banking or appraisal firm that has been
selected by the two firms so chosen by the Required Holders and the Company. In
each such case, the firm calculating Fair Market Value shall submit to the
Company and each Registered Holder such firm's written opinion addressed to each
such Registered Holder setting forth such determination. If the independent
investment banking or appraisal firm gives a range for its calculation of Fair
Market Value, then Fair Market Value shall be the midpoint of such range. The
fees and expenses of such firm will be borne by the Company, and the
determination of such firm will be final and binding upon all parties.
"Floating Price Securities" means the securities listed in Section 2 of
Attachment A hereto and any other agreement, instrument, document, arrangement
or understanding in existence on the Date of Issuance other than the Options and
the Convertible Securities pursuant to which the Company is either obligated or
permitted to issue shares of Common Stock.
"Identified Securities" means the Convertible Securities, the Floating
Price Securities and the Options.
"Investment Agreement" means the Investment Agreement, dated as of the
date hereof, between the Company and REI (as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof).
"Options" means the securities listed in Section 3 of Attachment A
hereto.
"Organic Change" has the meaning ascribed to it in Section 2F.
"Permitted Issuance" means (i) the issuance from time to time by the
Company of shares of Common Stock upon exercise of the Warrants, the Stock
Purchase Warrant, dated even date as the Date of Issuance, between the Company
and REI for the purchase of up to 4,000,000 shares of Common Stock (subject to
adjustment), the Stock Purchase Warrant, dated even date as the Date of
Issuance, between the Company and REI for the purchase of up to 10,119,614
shares of Common Stock (subject to adjustment) or any New Warrants (as each such
Warrant may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof) (and any replacements thereof), (ii) the
issuance from time to time by the Company of Identified Securities or of shares
of Common Stock upon the exercise of the Identified Securities, (iii) the
issuance from time to time by the Company of New Warrant and (iv) the issuance
by the Company of shares of Common Stock in accordance with Section 4.20 of the
Investment Agreement.
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"Person" means any individual, corporation, joint stock corporation,
limited liability company or partnership, general partnership, limited
partnership, proprietorship, joint venture, other business organization, trust,
union, association or governmental or regulatory authority.
"Purchase Rights" has the meaning ascribed to it in Section 3.
"Purchaser" has the meaning ascribed to it in Section 1C(i)(a).
"Registered Holder" has the meaning ascribed thereto in the first
paragraph of this Warrant.
"REI" means Recovery Equity Investors II, L.P., a Delaware limited
partnership.
"Required Holders" means, at any time of determination, holders of
Warrants that represent more than 50% of all of the Warrant Shares then issuable
upon exercise of the Warrants then outstanding.
"Shareholders Agreement" means the Shareholders Agreement dated as of
May 1, 1998, among the Company, REI and the other parties thereto as such
agreement may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Warrants" means this Stock Purchase Warrant and any other Warrants
issued pursuant to Section 7 or 8.
"Warrant Shares" means shares of Common Stock; provided, that if the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Shares" shall mean shares of the security issuable upon
exercise of the Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if such security is not
issuable in shares.
SECTION 5. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Registered Holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such Registered Holder for the Exercise Price of
Warrant Shares acquirable by exercise hereof or as a stockholder of the Company.
SECTION 6. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder
(subject to the provisions of paragraph 1B(iv) hereof), upon surrender of this
Warrant with a properly executed Assignment (in the form of Exhibit II hereto)
at the principal office of the Company. The Registered Holder shall not sell,
transfer or otherwise dispose of this Warrant or any Warrant Shares, in whole or
in part, except pursuant to
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an effective registration statement under the Securities Act or an exemption
from registration thereunder and then only in accordance with the terms of the
Stockholders' Agreement.
Each certificate evidencing shares of Warrant Shares and each Warrant
issued upon such transfer shall bear the restrictive legends set forth on this
Warrant and those required by the Stockholders' Agreement.
SECTION 7. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. All Warrants representing portions of the
rights hereunder are also referred to herein as "Warrants."
SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the Registered Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the same rights represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
SECTION 9. Information Regarding Identified Securities. As soon as
practical after the end of each fiscal quarter, and in any event with thirty
(30) days after the end of such fiscal quarter, the Company shall provide REI,
in writing, the following information, in each case calculated as of the last
date of such fiscal quarter, together with comparable figures from the fiscal
quarter immediately preceding such fiscal quarter;
(i) the number of Warrant Shares acquirable under this Warrant;
(ii) the number of Warrant Shares for which purchase rights
hereunder may be exercised;
(iii) all adjustments to the Warrant Shares during such fiscal
quarter, setting forth, in reasonable detail, all calculations related thereto,
including, without limitation, (A) all shares of Common Stock issued during such
fiscal quarter in connection with each of the Convertible Securities, Floating
Price Securities and the Options, (B) all Convertible Securities which have been
terminated without being converted during such fiscal quarter, (C) all Options
that have been terminated or expired without being exercised during such
quarter, (D) all Floating Price Securities for which payment has been made
without the issuance of Common Stock or
12
which have terminated during such quarter and (E) all adjustments to the
Identified Securities which result in an adjustment in the Warrant Shares;
(iv) the number of shares of Common Stock then issuable pursuant
to each of the Convertible Securities, the Floating Price Securities (at the
Deemed Issue Price) and the Options; and
(v) the price(s), if any, other than the Deemed Issue Price, at
which Common Stock would then be issued under each Floating Price Security, if
the issuance took place at that price.
SECTION 10. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 11. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Required Holders.
SECTION 12. Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 13. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. ALL QUESTIONS
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
* * * * *
13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated as of the date hereof.
CHADMOORE WIRELESS GROUP, INC.
By:
--------------------------
Name:
Title:
Attest:
------------------------------
Name:
Title:
[Certificate No. 2]
EXHIBIT I
EXERCISE AGREEMENT
Dated:
To:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. ), hereby agrees to subscribe for the purchase of
[Insert number] Warrant Shares covered by such Warrant and makes payment
herewith in full therefor at the price per share and in the manner provided by
such Warrant.
Signature
------------------------------
Address
--------------------------------
EXHIBIT II
ASSIGNMENT
----------
FOR VALUE RECEIVED, hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. ___) with respect to [Insert number] Warrant
Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
----------------- ------- -------------
Dated: Signature
--------------------------------
Witness
--------------------------------
Chadmoore Wireless Group, Inc. Attachment A
Section 1
---------
Convertible Securities Outstanding Securities Comments
---------------------- ---------------------- --------
See Floating Price Securities - - Section 2 See Section 2
Section 2
---------
Floating Price Securities Outstanding Securities Comments
------------------------- ---------------------- --------
Series B Preferred (related to the Settondown 1,738,120 86,906 Shares outstanding
financing) Conv. Formula = (86,906*10)/.5
Deemed Issue Price of $.50 per share
Cygni Restructured Note Due 09/98 3,345,000 10 payments of $162,750 per month
in the amount of $1,672,500 in cash or stock at market -- assumes
Deemed issue price of $0.50
Interest Due under the Cygni Note 800,000 Assumes payment in stock at the
Deemed issue price
Xxxxx Xxxxx Agreement 13,333 1/3 of $20,000 payment for development
of budgeting system at fair market value
on the date of issuance. Assumes $0.50
per share price.
Moscato Xxxxx & Partners, Inc. 79,200 $3,600 of Common Stock per month
Letter Agreement Commencing on 12/01/31 and Terminating
on 11/30/98. Assumes $0.50 per share
price.
Section 2 Cont.
--------------
Floating Price Securities Outstanding Securities Comments
------------------------- ---------------------- --------
M&A West 105,000 5,000 shares issued for signing and
Financial Consulting Services Agreement $50,000 in freely tradeably shares at an
assumed price of $0.50 per share.
Sub Total: 6,080,653
----------
Section 3
---------
Options
Options Authorized/Outstanding Comments
------ ---------------------- --------
Options Issued under the Amended 2,497,000 See Exhibit A
Non-Qualified Employee Stock Option Plan
Miscellaneous Option Issuances 3,642,305 See Exhibit B
Options Issued under the1998 Nonqualified 276,000 See Exhibit C
Stock Option Plan (Employee Pool Shares)
Remaining under the 1998 Nonqualified Stock 2,724,000 See Exhibit C
Option Plan (Employee Pool Shares)
Options Registered on Form S-8 #33-94508 25,000 See Exhibit D
Options Registered on Form S-8 #33-80405 0 See Exhibit E
Section 3 Cont.
--------------
Options
Options Authorized/Outstanding Comments
------ ---------------------- --------
Shares of Common Stock remaining under 27,500 See Exhibit E
Form S-8 #33-80405 to be issued
Shares of Common Stock remaining under 641,500 See Exhibit F
Form S-8# 333-4129 to be issued
Class A Warrants 385,604 See Exhibit G
Class B Warrants 1,931,916 See Exhibit H
Miscellaneous Issuances 881,250 See Exhibit I
Class C Warrants 150,000 See Exhibit J
Class D Warrants 150,000 See Exhibit K
Sub Total: 13,332,075
----------
Section 4
---------
Securities
Common Stock/Options to be issued to be Issued Comments
--------------------------------- ------------ --------
Cygni - Willora Restructure Shares 70,000
Options to be issued to Xxxxxxxx Xxxxxx 1,000
Sub Total: 71,000
----------
Total Common Stock Equivalents: 19,483,728
==========
