EXHIBIT 10.12a
ESOFT, INC.
WARRANT AGREEMENT
This Warrant Agreement is made and entered into by and between eSoft, Inc.,
a Colorado corporation (the "Company"), and Transition Partners Ltd. ("TPL"), as
of the 29th day of January, 1998.
WITNESSETH:
WHEREAS, pursuant to a Consulting Agreement between the Company and
Pantheon Capital Ltd., dated September 2, 1997, as amended November 11, 1997,
the Company has agreed to grant to Pantheon Capital Ltd. rights to purchase
264,600 shares of the Company's Common Stock as compensation for services
rendered under the Consulting Agreement;
WHEREAS, Pantheon Capital Ltd. has assigned its rights to purchase 66,150
of such shares to TPL;
WHEREAS, TPL has agreed to the modification of such rights so that they
shall not become exercisable until six months after the completion of an initial
public offering of the Company's Common Stock; and
WHEREAS, the Board of Directors of the Company has authorized the issuance
of this Stock Purchase Warrant to evidence the aforesaid rights as so modified;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, and for other good and valuable consideration, the
Company and TPL agree as follows:
1. GRANT OF WARRANTS. The Company hereby confirms the grant to TPL of the
right to purchase an aggregate of 66,150 shares (such number being subject to
adjustment as provided in paragraph 6 hereof) (the "Warrants") of the Common
Stock of eSoft, Inc. (the "Stock") on the terms and conditions herein set forth.
The Warrants may be exercised in whole or in part and from time to time as
hereinafter provided.
2. PURCHASE PRICE. The price at which TPL shall be entitled to purchase the
Stock covered by the Warrants shall be $1.00 per share during the first year the
Warrants are outstanding and increase 15 percent per share for the remainder of
the term of the Warrants.
3. TERM OF WARRANTS. The Warrants hereby granted shall be and remain in
force and effect until the normal close of business of the Company, the later of
February 1, 1999 or one year and 15 days after the Company's shares are listed
for trading, as defined in paragraph 4 below (the "Expiration Date").
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4. EXERCISE OF WARRANTS. The Warrants may be exercised as to all or any
part thereof six months after the date on which the Company's shares are listed,
posted and called for trading on the Vancouver Stock Exchange (the "Listing
Date"), provided that the Listing Date is on or before December 31, 1998, and
thereafter the Warrants may be exercised as to all or any part of such shares
(in not less than one hundred (100) share increments) at any time and from time
to time through the Expiration Date by delivery to the Company of written notice
of exercise and payment of the purchase price as provided in paragraph 5 hereof.
5. METHOD OF EXERCISING WARRANTS. Subject to the terms and conditions of
this Warrant Agreement, the Warrants may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company (the "Effective Date"). The notice shall state TPL's election to
exercise the Warrants, the number of shares in respect of which an election to
exercise has been made, and the exact name or names in which the shares will be
registered. Such notice shall be signed by TPL and shall be accompanied by
payment of the purchase price of such shares. Such payment may be in the form of
cash or certified or cashier's check in the amount of the full purchase price
(the number of shares being purchased multiplied by the price per share) or the
Company shall, at the request of TPL, accept as payment of the purchase price a
non-interest bearing, 12-month promissory note for all of the purchase price
except the par value (which amount shall be paid in cash) of the shares
purchased. Such note shall be secured by the shares purchased upon exercise of
the option. In the event the Warrants shall be exercised by a person or persons
other than TPL, such notice shall be signed by such other person or persons and
shall be accompanied by proof acceptable to the Company of the legal right of
such person or persons to exercise the Warrants. All shares delivered by the
Company upon exercise of the Warrants as provided herein shall be fully paid and
nonassessable upon delivery.
6. ADJUSTMENTS IN NUMBER OF SHARES AND WARRANT PRICE. If any change is made
to the Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding stock as a class without the Company's receipt of consideration,
appropriate adjustments shall be made to the number and the purchase price per
share in effect under the Warrants. Such adjustments to the Warrants shall be
effected in a manner that shall preclude the enlargement or dilution of rights
and benefits under such options. Any adjustments determined by the Company shall
be final, binding and conclusive.
If the Company shall be the surviving or resulting corporation in any
merger or consolidation, the Warrants granted hereunder shall pertain to and
apply to the securities or rights to which a holder of the number of shares of
Stock subject to the Warrants would have been entitled. TPL shall be entitled to
at least 20 days' prior written notice of any dissolution or liquidation of the
Company, or a merger or consolidation in which the Company is not the surviving
or resulting corporation.
7. DELIVERY OF SHARES. No shares of Stock shall be delivered upon exercise
of the Warrants until (i) the purchase price shall have been paid in full in the
manner herein provided; (ii) applicable taxes required to be withheld, if any,
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Warrants, or the issuance of shares
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thereunder, has been received by the Company; and (iv) if required by the
Company, TPL has delivered to the Company an investment letter in form and
content satisfactory to the Company as provided in paragraph 8 hereof.
8. SECURITIES ACT. The Company shall not be required to deliver any shares
of Stock pursuant to the exercise of all or any part of the Warrants, if, in the
opinion of counsel for the Company, such issuance would violate the Securities
Act of 1933 (the "1933 Act") or any other applicable federal or state securities
laws or regulations. The Company may require that TPL, prior to the issuance of
any such shares pursuant to exercise of the Warrants, sign and deliver to the
Company a written statement ("Investment Letter") stating (i) that TPL is
purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that TPL will not sell any shares received upon
exercise of the Warrants except pursuant to an effective registration statement
under the 1933 Act or an applicable exemption from the requirements for such
registration; and (iii) containing such other terms and conditions as counsel
for the Company may reasonably require to assure compliance with the 1933 Act or
other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Company in its
sole discretion.
If shares of Stock or other securities issuable pursuant to the exercise of
the Warrants have not been registered under the 1933 Act or other applicable
federal or state securities laws or regulations, such shares shall bear a legend
restricting the transferability thereof, such legend to be substantially in the
following form:
The shares represented by this certificate have not been registered or
qualified under federal or state securities laws. The shares may not
be offered for sale, sold, pledged or otherwise disposed of unless so
registered or qualified, unless an exemption exists or unless such
disposition is not subject to the federal or state securities laws,
and the availability of any exemption or the inapplicability of such
securities laws must be established by an opinion of counsel, which
opinion and counsel shall both be reasonably satisfactory to the
Company.
9. NONTRANSFERABILITY. No Warrants granted by this Warrant Agreement shall
be transferable by the grantee other than by will or pursuant to applicable laws
of descent and distribution. The Warrants, and any rights and privileges in
connection therewith, shall not be transferred, assigned, pledged or
hypothecated by the grantee, or by any person or persons, in any way, whether by
operation of law, or otherwise, and shall not be subject to execution,
attachment, garnishment or similar process. In the event of any such occurrence,
this Warrant Agreement shall automatically be terminated and shall thereafter be
null and void.
10. GOVERNING LAW. This Warrant Agreement shall be interpreted and
administered under the laws of the State of Colorado.
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11. AMENDMENTS. This Warrant Agreement may be amended only by a written
agreement executed by the Company and TPL.
IN WITNESS WHEREOF, the Company and TPL have caused this Warrant Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
eSoft, Inc.
By: /s/ Xxxxxx Xxxxxx
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President
Transition Partners Ltd.
By: /s/ W. Xxxxxxxx Xxxxxxxx
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