Exhibit 10.20
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
Corporation: xXxxxxxx.xxx
Number of Shares: See below.
Class of Stock: Common
Initial Exercise Price: See below.
Issue Date: October 21, 1999
Expiration Date: October 21, 2002
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, SILICON VALLEY BANK or registered
assignee ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth herein and as adjusted pursuant to Article 2
of this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant. The Warrant Price shall equal the lesser of (i) the
price per share at which the Shares are issued in the IPO, and (ii) $14.00 per
Share. Holder may acquire Shares under this Warrant from and after the date
that Borrower has made its first bona fide offering pursuant to a registration
statement under the Securities Act of 1933, as amended, of the sale of its
equity securities (the "IPO") and prior (i) to the completion by Borrower of the
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sale of its Preferred Series D Stock pursuant to an offering in which the
Company receives not less than Four Million Dollars ($4,000,000), and (ii) to
the Extended Bridge Loan Maturity Date (as defined in the Loan and Security
Agreement dated as of the Issue Date by and between Company, as borrower, and
Holder, as bank (the "Loan Agreement"))
This Warrant is issued in conjunction with that certain Warrant to Purchase
Preferred Stock dated as of the Issue Date (the "Preferred Warrant"). This
Warrant shall be effective upon the expiration of the Preferred Warrant as a
consequence of the closing of the IPO. If the initial exercise price of the IPO
is less than, or equal to, $8.00 per Share, then Holder shall be entitled to
purchase 45,000 Shares. Notwithstanding the foregoing, if the initial exercise
price of the IPO is greater than $8.00 per Share but less than, or equal to,
$11.00 per Share, then Holder shall be entitled to purchase 55,000 Shares.
Notwithstanding the foregoing, if the initial exercise price of the IPO is
greater than $11.00 per Share, then Holder shall be entitled to purchase 70,000
Shares. In addition, if Borrower has not fully repaid all outstanding Bridge
Loan Advances and accrued interest thereon as of the Bridge Loan Maturity Date,
then this Warrant shall be exercisable for an additional 1,250 Shares per day
until the same is fully repaid. Notwithstanding the foregoing, if Borrower has
not fully repaid all outstanding Bridge Loan Advances and accrued interest
thereon as of the earlier of (i) February 14, 2000 and (ii) 30 days following
the Equity Event (as defined in the Loan Agreement), then this Warrant shall be
exercisable for an additional 3,250 Shares per day until the same is fully
repaid.
ARTICLE 1. EXERCISE.
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1.1 Method of Exercise. Holder may exercise this Warrant by delivering
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this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
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Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.5.
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1.3 Intentionally Omitted.
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1.4 Fair Market Value. If the Shares are traded regularly in a public
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market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
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exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
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1.7.1 "Acquisition." For the purpose of this Warrant, "Acquisition"
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means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2 Assumption of Warrant. Upon the closing of any Acquisition the
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successor entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3 Purchase Right. Notwithstanding the foregoing, at the election
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of Holder, the Company shall purchase the unexercised portion of this Warrant
for cash upon the closing of any Acquisition for an amount equal to (a) the fair
market value of any consideration that would have been received by Holder in
consideration of the Shares had Holder exercised the unexercised portion of this
Warrant immediately before the record date for determining the shareholders
entitled to participate in the proceeds of the Acquisition, less (b) the
aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
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2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
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dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
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2.2 Reclassification, Exchange or Substitution. Upon any
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reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
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combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
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number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time, in the manner
set forth on Exhibit A, if attached, in the event of Diluting Issuances (as
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defined on Exhibit A).
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2.5 No Impairment. The Company shall not, by amendment of its Articles of
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Incorporation or through a 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 to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
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exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
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Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
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3.1 Representations and Warranties. The Company hereby represents and
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warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
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(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
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declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
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any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
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agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
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4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole
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or in part, at any time and from time to time on or before the Expiration Date
set forth above. The Company shall give Holder written notice of Holder's right
to exercise this Warrant in the form attached as Appendix 2 not more than 90
days and not less than 30 days before the Expiration Date. If the notice is not
so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
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directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
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Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may
4
not be transferred or assigned in whole or in part without compliance with
applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate of
Holder or if there is no material question as to the availability of current
information as referenced in Rule 144(c), Holder represents that it has complied
with Rule 144(d) and (e) in reasonable detail, the selling broker represents
that it has complied with Rule 144(f), and the Company is provided with a copy
of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
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may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) at any time to Silicon Valley Bancshares or
The Silicon Valley Bank Foundation, or, to any other transferree by giving the
Company notice of the portion of the Warrant being transferred setting forth the
name, address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for reissuance to the transferee(s)
(and Holder, if applicable). Unless the Company is filing financial information
with the SEC pursuant to the Securities Exchange Act of 1934, the Company shall
have the right to refuse to transfer any portion of this Warrant to any person
who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
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Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
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discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
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concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
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accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
xXxxxxxx.xxx
By:_______________________________________
Name:_____________________________________
(Print)
Title: Chairman of the Board, President or
Vice President
By:_______________________________________
Name:_____________________________________
(Print)
Title: Chief Financial Officer, Secretary,
Assistant Treasurer or Assistant Secretary
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APPENDIX 1
NOTICE OF EXERCISE
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1. The undersigned hereby elects to purchase ______________ shares of the
Common Stock of xXxxxxxx.xxx pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised
with respect to ______________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
(NAME)
________________________________
(ADDRESS)
________________________________
________________________________
________________________________
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
SILICON VALLEY BANK or a Registered
Assignee
____________________________________
(Signature)
____________________________________
(Date)
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APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
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_________________, _____
(Name of Holder)
____________________
(Address of Holder)
____________________
____________________
____________________
Attn: Chief Financial Officer
Gentleperson:
This is to advise you that the Warrant issued to you described below will
expire on Date.
Issuer: _________
Issue Date: _________
Class of Security Issuable: _________
Exercise Price Per Share: $________
Number of Shares Issuable: _________
Procedure for Exercise: Please contact ____________________ (name)
at _______________ (phone number)
with any questions you may have concerning
exercise of the Warrant.
This is your only notice of pending expiration.
xXxxxxxx.xxx
By:__________________________
Its:_________________________
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EXHIBIT A
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Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, or, if the Shares are common stock, less than the then conversion
price of the Company's Series C Preferred Stock, then the number of shares of
common stock issuable upon conversion of the Shares, or if the Shares are common
stock, the number of Shares issuable upon exercise of the Warrant, shall be
adjusted as a result of Diluting Issuances in accordance with the Holder's
standard form of Anti-Dilution Agreement in effect on the Issue Date.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
EXHIBIT B
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Registration Rights
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The Shares (if common stock), or the common stock issuable upon conversion
of the Shares, shall be deemed "registrable securities" or otherwise entitled to
"piggy back" registration rights in accordance with the terms of the following
agreement (the "Agreement") between the Company and its investor(s):
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[Identify Agreement by date, title and parties. If no Agreement
exists, indicate by "none".]
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit B is
attached, Holder shall be deemed to be a party to the Agreement, unless Holder
otherwise elects not to become or to cease being a party thereto.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
