EXHIBIT 10.4
FORM OF ADDITIONAL INVESTMENT RIGHT
EXHIBIT E
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
ADDITIONAL INVESTMENT RIGHT
To Purchase $________ Stated Value of Preferred Stock and Warrants
CIROND CORPORATION
THIS ADDITIONAL INVESTMENT RIGHT (the "AIR") 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 earlier of the close of business on the six month anniversary of the
Effective Date and the two year and one day anniversary of the date hereof (the
"TERMINATION DATE") but not thereafter, to subscribe for and purchase from
Cirond Corporation, a Nevada corporation (the "COMPANY"), up to $_____________
Stated Value of Series B 5% Convertible Preferred Stock (the "AIR PREFERRED
STOCK") and warrants to purchase shares of Common Stock of the Company as
described herein at an exercise price of $0.55 per share (the "AIR WARRANT
EXERCISE PRICE") (subject to adjustment hereunder and thereunder) (the "AIR
WARRANT"). Upon the purchase hereunder of AIR Preferred Stock, the Holder shall
receive a warrant to purchase a number of shares of Common Stock equal to 50% of
the shares of Common Stock underlying such AIR Preferred Stock. The initial
conversion price of the Preferred Stock shall be equal to $0.43 as described in
the Certificate of Designations, subject to adjustment thereunder and hereunder
("AIR PREFERRED STOCK CONVERSION PRICE"). The AIR Preferred Stock and AIR
Warrant shall be in the form of the Preferred Stock and Warrants (with the same
rights, privileges and preferences set forth in the Transaction Documents,
including without limitation, the Certificate of Designation) issued pursuant to
the Purchase Agreement, MUTATIS MUTANDIS. The AIR Preferred Stock and the AIR
Warrant shall be collectively referred to as the "AIR SECURITIES." The AIR
Warrant Exercise Price and the AIR Preferred Stock Conversion Price shall be
collectively referred to herein as the "AIR CONVERSION PRICE." Notwithstanding
anything herein to the contrary, in the event of any adjustment to the AIR
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Conversion Price under the Certificate of Designation that would also otherwise
result in an adjustment hereunder, the adjustment under the Certificate of
Designation shall control and no adjustment hereunder shall occur.
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 December 22, 2004, among
the Company and the purchasers signatory thereto.
SECTION 2. EXERCISE.
a) EXERCISE OF AIR. Exercise of the purchase rights represented
by this AIR 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) and the
payment of the Stated Value thereby purchased by wire transfer or
cashier's check drawn on a United States bank. Upon exercise of the
AIR, the Company shall issue shares of AIR Preferred Stock with a
Stated Value equal to the amount paid by the Holder and the AIR Warrant
to purchase a number of shares of Common Stock equal to 50% of the
shares of Common Stock issuable upon conversion of such AIR Preferred
Stock.
b) MECHANICS OF EXERCISE.
i. AUTHORIZATION OF AIR PREFERRED STOCK AND THE AIR
WARRANT. The Company covenants that during the period the
AIR is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares
to provide for the issuance of all of the shares of
Common Stock underlying the AIR Preferred Stock and AIR
Warrant (the collectively, "AIR CONVERSION SHARES"). The
Company further covenants that its issuance of this AIR
shall constitute full authority to its officers who are
charged with the duty of executing certificates to
execute and issue the necessary certificates for the AIR
Securities upon the exercise of the purchase rights under
this AIR and certificates upon conversion and exercise of
the AIR Securities. The Company covenants that the AIR
Securities which may be issued upon the exercise of the
purchase rights represented by this AIR and the AIR
Conversion Shares issuable thereunder will, upon exercise
of the purchase rights represented by this AIR, 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 will take all such reasonable action as may
be necessary to assure that the AIR Securities and AIR
Conversion 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.
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ii. DELIVERY OF CERTIFICATES UPON EXERCISE.
Certificates for the AIR Securities purchased hereunder
shall be delivered to the Holder within 3 Trading Days
from the delivery to the Company of the Notice of
Exercise Form, surrender of this AIR and payment of the
Stated Value as set forth above ("AIR SECURITY DELIVERY
DATE"). This AIR shall be deemed to have been exercised
on the date the payment of the principal amount is
received by the Company. The AIR Securities 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 security for
all purposes, as of the date the AIR has been exercised
by payment to the Company of the principal amount and all
taxes required to be paid by the Holder, if any, pursuant
to Section 2(b)(v) prior to the issuance of such
security, have been paid.
iii. DELIVERY OF NEW AIRS UPON EXERCISE. If this AIR
shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates
representing the AIR Securities, deliver to Holder a new
AIR evidencing the rights of Holder to purchase the
unpurchased AIR Securities called for by this AIR, which
new AIR shall in all other respects be identical with
this AIR.
iv. RESCISSION RIGHTS. If the Company fails to
deliver to the Holder a certificate or certificates
representing the AIR Securities pursuant to this Section
2(b)(iv) by the AIR Security Delivery Date, then the
Holder will have the right to rescind such exercise.
v. CHARGES, TAXES AND EXPENSES. Issuance of
certificates for AIR Securities 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 AIR Securities are to be
issued in a name other than the name of the Holder, this
AIR 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.
vi. CLOSING OF BOOKS. The Company will not close its
records in any manner which prevents the timely exercise
of this AIR, pursuant to the terms hereof or the
conversion or exercise of the AIR Securities pursuant to
the terms hereof.
c) CALL PROVISION. Subject to the provisions of this Section
2(c), (i) if after the Effective Date (x) the Closing Price for each of
20 consecutive Trading Days (the "MEASUREMENT PERIOD", which period
shall not have commenced until after the Effective
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Date) exceeds the initial Conversion Price by 150% (subject to
adjustment as set forth herein) (the "150% THRESHOLD PRICE") and (y)
the daily trading volume for each Trading Day during such Measurement
Period is at least 100,000 shares of Common Stock (subject to
adjustment for reverse and forward stock splits and the like) or (ii)
if after the Effective Date (x) the Closing Price for the Measurement
Period exceeds the initial Conversion Price by 200% (subject to
adjustment as set forth herein) (the "200% THRESHOLD PRICE",
collectively the 150% Threshold Price and the 200% Threshold Price
shall be the "THRESHOLD PRICE") and (y) the daily trading volume for
each Trading Day during such Measurement Period is at least 100,000
shares of Common Stock (subject to adjustment for reverse and forward
stock splits and the like) or (iii) if after the Effective Date, the
Company closes, consummates and completes a firm commitment
underwritten public offering of its Common Stock with gross proceeds to
the Company of at least $10 million (a "QPO") for a per share purchase
price of at least $2.00 (subject to adjustment for reverse and forward
stock splits and the like), then, (A) with respect to Section 2(c)(i)
and the 150% Threshold Price, the Company may, within one Trading Day
of the end of such Measurement Period, call for cancellation of up to,
in the aggregate, among all Holders of the AIR, for all Call Notices
(as defined below) relating to the 150% Threshold Price, $2,000,000 of
this AIR for which a Notice of Exercise has not yet been delivered, (B)
with respect to Section 2(c)(ii) and the 200% Threshold Price, the
Company may, within one Trading Day of the end of such Measurement
Period call for the cancellation of up to, in the aggregate, among all
Holders of the AIR, for all Call Notices (as defined below) relating to
the 200% Threshold Price, $2,000,000 of this AIR for which a Notice of
Exercise has not yet been delivered and (C) with respect to Section
2(c)(iii), the Company may, within one Trading Day of the closing date
of such QPO public offering, call for cancellation of all or any
portion of this AIR for which a Notice of Exercise has not yet been
delivered (such right, a "CALL"). For purposes of clarification, if the
150% Threshold Price shall only apply, in the aggregate, among all
Holders of AIRs, up to $2,000,000. To exercise this right, the Company
must deliver to the Holder an irrevocable written notice (a "CALL
NOTICE"), indicating therein the portion of unexercised portion of this
AIR to which such notice applies. If the conditions set forth below for
such Call are satisfied from the period from the date of the Call
Notice through and including the Call Date (as defined below), then any
portion of this AIR, as limited by Sections 2(c)(i) and (c)(ii) herein,
subject to such Call Notice for which a Notice of Exercise shall not
have been received by the Call Date will be cancelled at 6:30 p.m. (New
York City time) on the tenth Trading Day after the date the Call Notice
is received by the Holder (such date, the "CALL DATE"). Any unexercised
portion of this AIR to which the Call Notice does not pertain will be
unaffected by such Call Notice. In furtherance thereof, the Company
covenants and agrees that it will honor all Notices of Exercise with
respect to the AIR Securities subject to a Call Notice that are
tendered through 6:30 p.m. (New York City time) on the Call Date. The
parties agree that any Notice of Exercise delivered following a Call
Notice shall first reduce to zero the number of AIR Securities subject
to such Call Notice prior to reducing the remaining AIR Securities
available for purchase under this AIR. For example, if (x) this AIR
then permits the Holder to acquire $100 Stated Value of AIR Preferred
Stock, (y) a Call Notice pertains to $75 Stated Value of AIR Preferred
Stock, and (z) prior to 6:30 p.m. (New York City time) on the Call Date
the Holder tenders a Notice of Exercise in respect
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of $50 Stated Value of AIR Preferred Stock, then (1) on the Call Date
the right under this AIR to acquire $25 Stated Value of AIR Preferred
Stock will be automatically cancelled, (2) the Company, in the time and
manner required under this AIR, will have issued and delivered to the
Holder $50 Stated Value of AIR Preferred Stock in respect of the
exercises following receipt of the Call Notice, and (3) the Holder may,
until the Termination Date, exercise this AIR for $25 Stated Value of
AIR Preferred Stock (subject to adjustment as herein provided and
subject to subsequent Call Notices). Subject again to the provisions of
this Section 2(c), the Company may deliver subsequent Call Notices for
any portion of this AIR, as limited by Sections 2(c)(i) and (c)(ii),
for which the Holder shall not have delivered a Notice of Exercise.
Notwithstanding anything to the contrary set forth in this AIR, the
Company may not deliver a Call Notice or require the cancellation of
this AIR (and any Call Notice will be void), unless, from the beginning
of the Measurement Period through the Call Date (or, with respect to a
Call triggered by a QPO, during the 30 consecutive Trading Days prior
to such Call Date), (i) the Company shall have honored in accordance
with the terms of this AIR all Notices of Exercise delivered by 6:30
p.m. (New York City time) on the Call Date, (ii) the Registration
Statement shall be effective as to all shares of Common Stock
underlying the AIR Securities and the prospectus thereunder available
for use by the Holder for the resale of all such shares, (iii) the
Common Stock shall be listed or quoted for trading on the Trading
Market and (iv) with respect to a Call triggered by a QPO, the Company
shall have consummated such QPO within 90 days of giving the Call
Notice. The Company's right to Call the AIR shall be exercised ratably
among the Holders based on each Holder's initial purchase of Preferred
Stock pursuant to the Purchase Agreement.
SECTION 3. CERTAIN ADJUSTMENTS.
a) STOCK DIVIDENDS AND SPLITS. If the Company, at any time
while this AIR 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 the AIR
Securities), (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
AIR Conversion 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. 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.
b) SUBSEQUENT EQUITY SALES. If the Company or any Subsidiary
thereof, as applicable, at any time while this AIR 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)
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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 AIR Conversion 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 AIR Conversion Price, such issuance shall
be deemed to have occurred for less than the AIR Conversion Price),
then, the AIR Conversion Price shall be reduced to a price equal to the
Base Share Price. Additionally, the number of AIR Warrant Shares
issuable hereunder shall be increased such that the aggregate AIR
Warrant Exercise Price payable hereunder, after taking into account the
decrease in the AIR Conversion Price, shall be equal to the aggregate
AIR Warrant Exercise Price prior to such adjustment. Such adjustment
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 securities 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 while
this AIR is outstanding, distributes to all holders of Common Stock
(and not to Holders) 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 AIR Conversion Price shall be determined by multiplying such
AIR Conversion 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
Closing Price determined as of the record date mentioned above, and of
which the numerator shall be such Closing Price on such record date
less the then 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 Holder of the portion of
assets or evidences of indebtedness 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 and adjustments to the AIR
Conversion Price under this Section 3 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of
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Common Stock outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding.
e) NOTICE TO HOLDERS.
i. ADJUSTMENT TO AIR CONVERSION PRICE. Whenever the AIR
Conversion Price is adjusted pursuant to this Section 3, the
Company shall promptly mail to each Holder a notice setting
forth the AIR Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.
ii. NOTICE TO ALLOW EXERCISE BY HOLDER. 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 AIR 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 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 AIR 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 AIR 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
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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 exercise of this AIR the Holder shall have the right to
receive upon conversion or exercise of the AIR Securities, as
applicable, for each AIR Conversion Share that would have been issuable
upon such exercise and then subsequent conversion absent such
Fundamental Transaction, at the option of the Holder, (a) upon
conversion or exercise of the AIR Securities, 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 the underlying AIR Securities are
convertible immediately prior to such event or (b) cash equal to the
value of this AIR as determined in accordance with the Black-Scholes
option pricing formula (the "ALTERNATE CONSIDERATION"). For purposes of
any such deemed conversion, the determination of the AIR Conversion
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 AIR Conversion 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 conversion or exercise of
the AIR Securities underlying this AIR 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 additional
investment right consistent with the foregoing provisions and
evidencing the Holder's right to exercise such additional investment
right ultimately 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
AIR (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 AIR reduce the then current AIR Conversion
Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
SECTION 4. TRANSFER OF AIR.
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a) TRANSFERABILITY. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(e)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this AIR and all rights hereunder are transferable, in whole or in
part, upon surrender of this AIR at the principal office of the
Company, together with a written assignment of this AIR 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 AIR or AIRs 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 AIR evidencing the portion of this AIR not
so assigned, and this AIR shall promptly be cancelled. An AIR, if
properly assigned, may be exercised by a new holder for the purchase of
AIR Securities without having a new AIR issued.
b) NEW AIRS. This AIR may be divided or combined with other
AIRs upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations
in which new AIRs 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 AIR or AIRs in exchange for the
AIR or AIRs to be divided or combined in accordance with such notice.
c) AIR REGISTER. The Company shall register this AIR, upon
records to be maintained by the Company for that purpose (the "AIR
REGISTER"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this AIR 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
d) TRANSFER RESTRICTIONS. If, at the time of the surrender of
this AIR in connection with any transfer of this AIR, the transfer of
this AIR 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 AIR,
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 THE ADDITIONAL INVESTMENT RIGHT. Prior to the
Termination Date and subject to compliance with applicable laws and
Section 4 of this AIR, this AIR and
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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 AIR 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 AIR 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 AIR and the payment of the aggregate principal, the
AIR Securities 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 AIR. The Company
covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of
this AIR or any certificate relating to the AIR Securities, and in case
of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the AIR, shall not include
the posting of any bond), and upon surrender and cancellation of such
AIR or certificate, if mutilated, the Company will make and deliver a
new AIR or certificate of like tenor and dated as of such cancellation,
in lieu of such AIR or 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.
e) AUTHORIZED SHARES.
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 AIR or the AIR
Securities, 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 AIR and the AIR
Securities against impairment. Without limiting the generality
of the foregoing, the Company will (a) take all such action as
may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable AIR
Securities upon the exercise of this AIR and AIR Conversion
Shares upon conversion and exercise of the AIR Securities, and
(b) 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 AIR
and the AIR Securities.
10
Before taking any action which would result in an
adjustment in the AIR Securities for which this AIR is
exercisable or in the AIR Conversion 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 AIR shall be
determined in accordance with the provisions of the Purchase Agreement.
g) RESTRICTIONS. The Holder acknowledges that the AIR
Securities acquired upon the exercise of this AIR, if not registered,
will have restrictions upon resale imposed by state and federal
securities laws.
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 AIR, 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 AIR or purchase
AIR Securities, 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 AIR. 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 AIR 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 AIR 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 AIR are intended to be for the benefit of all
Holders from
11
time to time of this AIR and shall be enforceable by any such Holder or
holder of AIR Securities.
m) AMENDMENT. This AIR 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 AIR
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this AIR 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 AIR.
o) HEADINGS. The headings used in this AIR are for the
convenience of reference only and shall not, for any purpose, be deemed
a part of this AIR.
********************
12
IN WITNESS WHEREOF, the Company has caused this AIR to be executed by
its officer thereunto duly authorized.
Dated: December 22, 2004
CIROND CORPORATION
By:
------------------------------------
Name:
Title:
13
NOTICE OF EXERCISE
TO: CIROND CORPORATION
(1) The undersigned hereby elects to purchase $________ Stated Value of
AIR Preferred Stock and Warrants to purchase _____ shares of Common Stock of
Cirond Corporation pursuant to the terms of the attached AIR and tenders
herewith payment of the principal 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
(3) Please issue a certificate or certificates representing said AIR
Securities in the name of the undersigned or in such other name as is specified
below:
-----------------------------------
The AIR Securities 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:
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SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY:
--------------------------
Name of Authorized Signatory:
---------------------------------------------------
Title of Authorized Signatory:
--------------------------------------------------
Date:
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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 AIR and all rights evidenced thereby
are hereby assigned to
whose address is
------------------------------------------------
----------------------------------------------------------------------.
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Dated:
-------------------,----------
Holder's Signature:
----------------------------------
Holder's Address:
------------------------------------
------------------------------------
Signature Guaranteed:
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NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the AIR, 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 AIR.
