EXHIBIT 10.2
AVENUE A, INC.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement"), is effective as of August 7,
1998, by and between Avenue A, Inc.(the "Company"), a Washington corporation,
and ________________ (the "Warrantholder").
RECITALS
A. In connection with the issuance of shares of the Company's Series A
Preferred Stock to the Warrantholder, the Company desires to issue, and the
Warrantholder desires to receive, a warrant ("Warrant") for the purchase of
451,807 shares of the Company's Common Stock (the "Warrant Shares") at an
exercise price of $0.83.
B. The parties hereto desire to set forth certain rights and obligations
in respect of Warrant and the Warrant Shares.
NOW THEREFORE, in consideration of the issuance of the Warrant, the
foregoing recitals and the mutual promises set forth below, the parties hereto
agree as follows:
AGREEMENT
1. Issuance of the Warrant
Concurrently with the execution and delivery of this Agreement, the Company
is issuing the Warrant to the Warrantholder. "Warrant Shares" shall be defined
as the shares of Common Stock issuable upon exercise of the Warrant, and all
securities received in replacement of or in connection with the Warrant Shares
pursuant to stock dividends or splits, all securities received in replacement of
the Warrant Shares in a recapitalization, merger, reorganization, exchange or
the like, and all new, substituted or additional securities or other properties
to which any holder of the Warrant shall become entitled to by reason of being
the holder of the Warrant.
2. Disposition Prohibited
The Warrantholder shall not dispose of the Warrant or any Warrant Shares
acquired upon exercise thereof, except as permitted by this Agreement, and any
such attempted disposition shall be void and shall not be recognized or
registered upon the books of the Company. The term "dispose" includes, but is
not limited to, the acts of
-1-
selling, assigning, transferring, pledging, encumbering, giving away, devising,
and any other form of conveying, including conveyances caused by marital
separation, divorce, receivership, or bankruptcy, whether voluntary or
involuntary or by operation of law.
3. Right of First Refusal
3.1 Restriction
Before the Warrant or the Warrant Shares held by the Warrantholder or any
transferee of the Warrantholder (either being sometimes referred to as the
"Holder") may be sold or otherwise disposed of (as defined above but excluding
transfers described in and governed by Section 4), the Company or its
assignee(s) shall have a right of first refusal to purchase the Warrant or the
Warrant Shares, as the case may be, on the terms and conditions set forth in
this Section 3 (the "Right of First Refusal").
3.2 Notice of Proposed Transfer
The Holder of the Warrant or the Warrant Shares, as the case may be, shall
deliver to the Company a written notice (the "Notice") stating: (a) the
Holder's bona fide intention to sell or otherwise transfer such Warrant or
Warrant Shares; (b) the name and address of any proposed purchaser or other
transferee ("Proposed Transferee"); (c) in the case of a proposed transfer of
Warrant Shares, the number of Warrant Shares to be transferred; and (d) the
terms and conditions of any proposed sale or transfer, including the proposed
purchase price for the Warrant or the Warrant Shares, as the case may be, to be
transferred (the "Offered Price").
3.3 Exercise of Right of First Refusal
At any time within thirty (30) days after receipt of the Notice, the
Company and/or its assignee(s) may, by giving written notice to the Holder,
elect to purchase, in the event of a proposed transfer of the Warrant, the
Warrant or, in the event of a proposed transfer of Warrant Shares, all or any
portion of the Warrant Shares, that are proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in accordance
with subsection 3.4 below.
3.4 Purchase Price
The purchase price ("Purchase Price") for the Warrant or the Warrant
Shares, as the case may be, purchased by the Company or its assignee(s) under
this Section 3 shall be the Offered Price. If the Offered Price includes
consideration other than cash,
-2-
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
3.5 Payment
Payment of the Purchase Price shall be made, at the option of the Company
or its assignee(s), in cash (by check or wire transfer of immediately available
funds), by cancellation of all or a portion of any outstanding indebtedness of
the Holder to the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof within thirty (30) days after receipt
of the Notice or in the manner and at the times set forth in the Notice.
3.6 Holder's Right to Transfer
If the Warrant or any of the Warrant Shares, as the case may be, proposed
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in Section 3.3, then the
Holder may sell or otherwise transfer such Warrant or Warrant Shares, as the
case may be, to that Proposed Transferee at the Offered Price or at a higher
price, provided that such sale or other transfer is consummated within ninety
(90) days after the date of the Notice and provided further that any such sale
or other transfer is effected in accordance with any applicable securities laws
and the Proposed Transferee and any spouse executes an endorsement in the form
attached as Exhibit A, acknowledging that the provisions of this Agreement shall
continue to apply to the Warrant or the Warrant Shares, as the case may be, in
the hands of such Proposed Transferee (an "Endorsement"). If the Warrant or the
Warrant Shares, as the case may be, are not transferred to the Proposed
Transferee within such period, or if the Holder proposes to change the price or
other terms to make them more favorable to the Proposed Transferee, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before the Warrant or any Warrant Shares
held by the Holder may be sold or otherwise transferred.
3.7 Exception for Certain Family Transfers
Notwithstanding anything to the contrary in this Section 3, the transfer of
the Warrant or any or all of the Warrant Shares during the Warrantholder's
lifetime or on the Warrantholder's death by will or intestacy to the
Warrantholder's Immediate Family or a trust for the benefit of the
Warrantholder's Immediate Family shall be exempt from the provisions of this
Section 3. "Immediate Family" as used herein shall mean the Warrantholder's
spouse (except in the case of divorce), father, mother, brother, sister or
children or an entity in which all beneficial ownership interests are held by
the Warrantholder, any of the aforementioned persons or any other such
-3-
entity. In such case, the transferee or other recipient shall receive and hold
the Warrant or the Warrant Shares, as the case may be, so transferred subject to
the provisions of this Agreement, shall execute an Endorsement and there shall
be no further transfer of the Warrant or the Warrant Shares except in accordance
with the terms of this Agreement.
4. Involuntary Transfer
4.1 Company's Right to Purchase upon Involuntary Transfer
In the event, at any time after the date of this Agreement, of any transfer
by operation of law or other involuntary transfer (including death, divorce,
legal separation or bankruptcy, but excluding a transfer to Immediate Family as
set forth in Section 3.7 above) of the Warrant or all or a portion of the
Warrant Shares by the Holder, the Company or its assignee(s) shall have an
option to purchase the Warrant (in the event the Warrant is so transferred) or
all of the Warrant Shares so transferred (in the event Warrant Shares are so
transferred) at the greater of the purchase price paid by the Holder for such
Warrant or Warrant Shares, as the case may be, or the Fair Market Value (as
defined below) of the Warrant or the Warrant Shares, as the case may be, on the
date of transfer. The Holder or the Holder's executor shall promptly notify the
Secretary of the Company in writing of such involuntary transfer. The right to
purchase such Warrant or Warrant Shares, as the case may be, shall be provided
to the Company or its assignee(s) for a period of thirty (30) days following
receipt by the Company of such written notice. If the proposed transfer is
required by the order, judgment or decision of a court, arbitrator or other
third party, the Holder or the Holder's executor shall notify such court,
arbitrator or other third party of the Company's rights under this Section 4.1.
4.2 Price for Involuntary Transfer
For purposes of this Agreement, the "Fair Market Value" of the Warrant or
the Warrant Shares, as the case may be, shall be defined as the value of the
Warrant or the Warrant Shares, respectively, as determined by the Board of
Directors of the Company, which value reflects the then-current value of the
Warrant or the Warrant Shares, respectively, in terms of present earnings and
future prospects of the Company. The Company shall notify the Holder or the
Holder's executor of the Fair Market Value within thirty (30) days after receipt
by it of written notice of the proposed transfer of Warrant or the Warrant
Shares, as the case may be. However, if the Holder or the Holder's executor
does not agree with the valuation as determined by the Board of Directors of the
Company, the Holder or the Holder's executor shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by
the Company and the Holder or the Holder's executor and
-4-
whose fees shall be borne equally by the Company and the Holder or the Holder's
estate.
5. Assignment of Company Rights
The rights of the Company to purchase the Warrant or any part of the
Warrant Shares may be assigned in whole or in part to any shareholder of the
Company or other persons or organizations.
6. Restrictions Binding on Transferees
All transferees of the Warrant or any Warrant Shares or any interest
therein will receive and hold such Warrant or Warrant Shares, as the case may
be, or such interest therein subject to the provisions of this Agreement. Any
sale or transfer of the Warrant or the Warrant Shares, as the case may be, shall
be void unless the provisions of this Agreement are met.
7. Termination of Rights
This Agreement shall terminate upon the closing of the first sale of Common
Stock of the Company to the general public (an "Initial Public Offering") under
a registration statement declared effective under the Securities Act of 1933, as
amended (the "Securities Act"), or any successor statute. If this Agreement
terminates and the Warrant has been exercised, a new certificate or certificates
representing the Warrant Shares shall be issued, on request, without the second
paragraph of the legend required by Section 10.1 and delivered to the holder of
the Warrant Shares.
8. Representations, Warranties and Covenants of the Warrantholder
The Warrantholder represents, warrants and covenants to the Company that:
8.1 No Sale or Distribution; Investigation
The right to acquire the Warrant Shares issued or issuable upon exercise of
the Warrant is being acquired by the Warrantholder for the Warrantholder's own
personal account for investment and not with a view to the sale or distribution
of all or any part thereof or of the Warrant Shares, and no one other than the
Warrantholder has any beneficial interest in such rights. The Warrantholder has
had full opportunity to ask questions and receive answers concerning the Warrant
and the Warrant Shares and the financial condition of the Company.
-5-
8.2 Authority; Binding Agreement
The Warrantholder has the full legal right, power and authority to enter
into and to perform this Agreement. This Agreement constitutes the
Warrantholder's valid and binding obligation, enforceable against the
Warrantholder in accordance with its terms.
8.3 No Registration of Warrant Shares; Restricted Securities
The Warrantholder understands that the Warrant and the Warrant Shares have
not been registered under the Securities Act by reason of a specific exemption,
which exemption depends upon, among other things, the bona fide nature of the
Warrantholder's investment intent as expressed here. The Warrantholder
understands that the Company has no present intention of registering the Warrant
or the Warrant Shares, and that under federal securities laws and applicable
regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances. In this connection, the
Warrantholder represents that he, she or it is familiar with Rule 144 and Rule
701 under the Securities Act, as presently in effect, and understands the resale
limitations imposed by the Securities Act.
8.4 Sophistication
Such Warrantholder, either alone or with the assistance of his, her or its
professional advisor, is a sophisticated investor, is able to fend for his, her
or itself in the transactions contemplated by this Agreement, and has such
knowledge and experience in financial and business matters that he, she or it is
capable of evaluating the merits and risks of the Warrant and a purchase of the
Warrant Shares upon exercise of the Warrant.
8.5 Suitability
The Warrant and the Warrant Shares into which it is exercisable are
suitable investments for Warrantholder based upon his, her or its investment
objectives and financial needs, and such Warrantholder has adequate net worth
and means for providing for his, her or its current financial needs and
contingencies and has no need for liquidity of investment with respect to the
Warrant or the Warrant Shares. Such Warrantholder's overall commitment to
investments that are illiquid or not readily marketable is not disproportionate
to his, her or its net worth, and investment in the Warrant Shares would not
cause such overall commitment to become excessive.
-6-
8.6 Professional Advice
Such Warrantholder has obtained, to the extent he, she or it deems
necessary, his, her or its own professional advice with respect to the risks
inherent in the Warrant and the Warrant Shares into which it is exercisable, the
condition of the Company and the suitability of the acquisition of the Warrant
and acquisition of Warrant Shares upon exercise thereof in light of such
Warrantholder's financial condition and investment needs.
8.7 Ability to Bear Risk
Such Warrantholder is in a financial position to hold the Warrant and
purchase and hold any Warrant Shares into which it is exercisable and is able to
bear the economic risk and withstand a complete loss of his, her or its
investment therein.
8.8 Residency
For purposes of the application of state securities laws, such
Warrantholder represents that he, she or it is a bona fide resident of, and/or
is domiciled in, the state identified in the address on the signature page
hereof for such Warrantholder.
8.9 Accreditation
Such Warrantholder is familiar with the term "accredited investor" and its
use in connection with private placements of securities under applicable federal
and state laws. Accordingly, such Warrantholder represents and warrants that
he, she or it is an accredited investor as such term is defined in Rule 501(a)
under the Securities Act and as defined pursuant to the provisions of state
securities laws applicable to such Warrantholder providing for an exemption from
registration or qualification of the offer and sale of the Warrant and Warrant
Shares.
9. Representations and Warranties of the Company
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $.01, of which 11,996,000 shares are issued and
outstanding, and 4,000,000 shares of Series A Preferred Stock, par value $.01
per share, of which no shares are issued and outstanding. Pursuant to the
Company's 1998 Stock Option Plan (the "Plan"), 3,500,000 shares of Common Stock
are reserved for issuance pursuant to the exercise of options granted under such
plan and options to purchase 2,284,300 shares of Common Stock are outstanding
under such Plan. Simultaneously with the execution of this Warrant, the Company
intends to issue up to 3,700,000 shares of Series A Preferred Stock. Except for
the conversion privileges of the Series A Preferred Stock and the currently
outstanding options to purchase
-7-
2,284,300 shares of Common Stock granted under the Plan there are no outstanding
options, warrants, rights, including conversion or preemptive rights, or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock.
10. Restrictive Legends and Stop-Transfer Orders
10.1 Restrictive Legend
The Secretary of the Company shall endorse all certificates representing
Warrant Shares owned by the Warrantholder and all certificates representing
Warrant Shares issued or transferred after this Agreement is entered into with
the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE LAW, AND NO INTEREST MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (a) THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID
SECURITIES, (b) THIS CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL
FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THIS CORPORATION
STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (c) THIS
CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
10.2 Stop Transfer Order; No Transfer in Violation of Agreement
The Warrantholder agrees that, in order to ensure compliance with this
Agreement's restrictions, the Company may issue appropriate "stop transfer"
instructions to its transfer agent, if any, and that, if the Company transfers
its own
-8-
securities, it may make appropriate notations to the same effect in its own
records. The Company shall not be required (a) to transfer on its books the
Warrant or any Warrant Shares, as the case may be, that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement or
(b) to treat as owner of such Warrant or Warrant Shares, as the case may be, or
to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such Warrant Shares shall have been so transferred.
11. Miscellaneous
11.1 Specific Enforcement; Severability
The Warrantholder expressly agrees that the Company and its shareholders
will be irreparably damaged if this Agreement is not specifically enforced.
Upon a breach or threatened breach of the terms, covenants and/or conditions of
this Agreement by the Warrantholder, the Company shall, in addition to all other
remedies, be entitled to a temporary or permanent injunction, without showing
any actual damage, and/or a decree for specific performance, in accordance with
the provisions of this Agreement. If any provision of this Agreement is
determined by a court of competent jurisdiction to be invalid or unenforceable,
such determination shall not affect the validity or enforceability of any other
part of this Agreement.
11.2 Notices
Notices given pursuant to this Agreement shall be deemed duly given on the
date of personal delivery, on the date sent by fax or three days after mailing
if mailed by certified or registered mail, return receipt requested, postage
prepaid, to the party at its address on the signature page below or such other
address of which the addressee may subsequently notify the other parties in
writing.
11.3 Expenses
Except as specifically provided to the contrary, each party shall pay his,
her or its own expenses incurred in connection with this Agreement or any
transactions contemplated by this Agreement.
11.4 Governing Law
This Agreement and the rights and obligations of the parties shall be
governed by and construed in accordance with the laws of the state of Washington
applicable to the construction and enforcement of contracts wholly executed and
performed in Washington.
-9-
11.5 Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
11.6 Amendments; Waivers
Neither this Agreement nor any provision may be amended except by written
agreement signed by the parties. No waiver of any breach or default shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-10-
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
AVENUE A, INC.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: Secretary
Company address: Avenue A, Inc.
0000 Xxxxx Xxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxx
WARRANTHOLDER
Signature:
------------------------------------
Name:
------------------------------------
Address:
------------------------------------
------------------------------------
-1-
AVENUE A, INC.
WARRANT AGREEMENT
CONSENT OF SPOUSE
-----------------
I, ____________________, spouse of ________________________, have read and
approve the foregoing Warrant Agreement (the "Agreement"). In consideration of
the terms and conditions as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact with respect to the amendment of or the exercise
of any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in the Agreement, the Warrant or any
Warrant Shares issued pursuant to the Warrant under the community property laws
of the state of Washington or similar laws relating to marital property in
effect in the state of our residence as of the date of the Agreement. I have
been informed of my right to obtain independent legal counsel concerning this
Agreement and the rights and obligations provided for in this Agreement, and by
execution of this Agreement, acknowledge having either obtained such independent
counsel or having waived the same.
Date:__________________________________
_______________________________________
(Signature)
_______________________________________
(Printed Name)
-2-
EXHIBIT A
AVENUE A, INC.
WARRANT AGREEMENT
ENDORSEMENT
-----------
The undersigned, a holder of a warrant to purchase shares of common stock
of Avenue A, Inc. (the "Company") or a holder of shares of common stock of the
Company, and his or her spouse hereby agree to the terms and conditions of the
Warrant Agreement dated as of _________________, 1998 originally entered into by
and among the Company and the other party listed on the signature page thereof
and acknowledge receipt of a copy of such Agreement and agree to be bound by
such Agreement as if the undersigned were the original holder of the Warrant (if
the undersigned acquired the Warrant as defined in the Agreement) or the Warrant
Shares (if the undersigned acquired Warrant Shares as defined in the Agreement )
bound by such Agreement.
_________________________________ ___________________________________
(Signature of Undersigned Holder) (Signature of Spouse)
_________________________________ ___________________________________
(Printed Name) (Printed Name)
_________________________________ ___________________________________
(Date) (Date)
EXHIBIT B
AVENUE A, INC.
WARRANT AGREEMENT
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to the Warrant Agreement between the
undersigned ("Holder") and Avenue A, Inc. (the "Company") dated
_____________________, 1998 (the "Agreement"), Holder hereby sells, assigns and
transfers unto the Company ________________________________ (___________) shares
of the Common Stock of the Company standing in Holder's name on the Company's
books and represented by Certificate No. ________, and does hereby irrevocably
constitute and appoint _______________________________ to transfer said stock on
the books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated: _______________________
Signature:
_________________________________
Holder
_________________________________
Spouse
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Holder.
