Exhibit 4.15
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
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 THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIDELITY HOLDINGS, INC.
WARRANT
Warrant No. SR-1 Dated: June 24, 1999
Fidelity Holdings, Inc., a Nevada corporation (the "Company"), hereby
certifies that, for value received, Strong River Investments, Inc., or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to the total number of shares of Common
Stock, $.01 par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") calculated
pursuant to Section 3 of this Warrant at an exercise price equal to $.01 per
share (as adjusted from time to time as provided in Section 9, the "Exercise
Price"), at the times set forth herein through and including the Third Vesting
Period Expiration Date (as defined in Section 3(a)(iii) hereof) (the "Expiration
Date"), and subject to the following terms and conditions (certain terms used
herein are defined in Exhibit A attached hereto):
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly completed and signed, to the Transfer Agent
or to the Company at the address specified in Section 13. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at the address specified in Section 13 for
one or more New Warrants, evidencing in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration, Vesting and Exercise of Warrant.
(a) The vesting of the Warrant Shares which the Holder is permitted
to acquire pursuant to this Warrant shall occur on the dates set forth below in
this Section 3(a). On each such date, this Warrant shall vest with respect to a
number of Warrant Shares calculated pursuant to Section 3(b) below. Warrant
Shares that have vested on a Vesting Date (as defined below) may be acquired by
the Holder at any time and from time to time only during the forty (40) Trading
Days following such Vesting Date, upon exercise of this Warrant, provided, that
each such forty (40) Trading Day period shall be extended by the number of days
during such period which the Holder is for any reason unable to use the
Underlying Shares Registration Statement or the prospectus thereunder in order
to sell securities thereunder.
(i) The first vesting date (the "First Vesting Date") shall be
the fortieth (40th) Trading Day following the Effectiveness Date, provided, that
if the Effectiveness Date shall not have occurred prior to the Effectiveness
Required Date, then at the option of the Holder (exercisable by notice delivered
to the Company no later than three (3) Trading Days following the Effectiveness
Required Date), the First Vesting Date shall occur on the (30th) Trading Day
following the Effectiveness Required Date (the Warrant Shares with respect to
which this Warrant is exercisable on the First Vesting Date are called the
"First Reset Warrant Shares");
(ii) The second vesting date (the "Second Vesting Date") shall
be the fortieth (40th) Trading Day following the First Vesting Date (the Warrant
Shares with respect to
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which this Warrant is exercisable on the Second Vesting Date are called the
"Second Reset Warrant Shares"); and
(iii) The third vesting date (the "Third Vesting Date," and
together with the First Vesting Date and the Second Vesting Date, the "Vesting
Dates") shall be the fortieth (40th) Trading Day (such forty (40) Trading
Period, as extended pursuant to the last sentence of Section 3(a), the "Third
Vesting Date Expiration Date") following the Second Vesting Date (the Warrant
Shares with respect to which this Warrant is exercisable on the Third Vesting
Date are called the "Third Reset Warrant Shares").
(b) Except as otherwise set forth in this Warrant, this Warrant
shall vest and become exercisable on each Vesting Date with respect to the
number of Warrant Shares calculated in accordance with the following formula:
(Applicable Share Number) x [(Purchase Price x 1.15) - Adjustment Price]
Adjustment Price
If the number calculated in accordance with the foregoing formula is zero
or a negative number, the Holder shall not be obligated to transfer any shares
of Common Stock to the Company. On each Vesting Date, the Company shall send a
notice to the Holder setting forth in reasonable detail its calculation of the
number of Warrant Shares which shall vest and be exercisable on such Vesting
Date. Notwithstanding anything to the contrary set forth herein, if, on any
Trading Day occurring after the Effectiveness Date during which (1) for the
immediately preceding fifteen (15) Trading Days there was an effective
Underlying Shares Registration Statement pursuant to which the Holder was
permitted to resell Underlying Shares and (2) the average of the Per Share
Market Values for the fifteen (15) Trading Days immediately preceding such date
equaled or exceeded $31.50 (the "Threshold Price"), then this Warrant shall not
vest for any Warrant Shares with respect to any Vesting Date that would occur
after the expiration of such fifteen (15) Trading Day period, provided, that the
application of this sentence shall have no effect on the vesting of Warrant
Shares in respect of a Vesting Date unless all of the Trading Days used to
calculate such fifteen (15) Trading Day average occurred prior to the 15th
Trading Day immediately preceding such Vesting Date, but shall terminate vesting
rights with respect to subsequent Vesting Dates, if any.
(c) The vesting of the Warrant Shares in accordance with this
Section 3 shall not be affected by any failure by the Company to cause the
Underlying Shares Registration Statement declared effective by the Commission or
maintain the effectiveness of the Underlying Shares Registration Statement after
it has been declared effective by the Commission.
(d) Notwithstanding anything herein to the contrary, if on any
Vesting Date the Adjustment Price shall be less than $14.00 (such an Adjustment
Price, the "Floor Price"), then on such Vesting Date: (i) this Warrant shall
vest with respect to the Warrant Shares pursuant to Section 3(a) and (b) hereof,
provided, that the Adjustment Price pursuant to the formula set forth in Section
3(b) shall, exclusively for purposes of this Section 3(d)(i), equal the Floor
Price (such number of
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Warrant Shares, the "Initial Shares") and (ii) with respect to the Warrant
Shares whose vesting would result in a vesting of Warrant Shares in excess of
the Initial Shares, the Company will have the option to elect by written notice
(the "Notice") delivered to the Holder no later than twenty (20) Trading Days
prior to the applicable Vesting Date to either (x) pay to the Holder, in cash
(the "Cash Payment"), within three (3) Trading Days from the Vesting Date at
issue, an amount equal to the product obtained by multiplying (A) the applicable
Adjustment Price and (B) the difference between the number of Warrant Shares
which would have otherwise vested on such Vesting Date pursuant to Section 3(a)
and (b) hereof and the Initial Shares (such number of Warrant Shares, the
"Subsequent Shares") or (y) allow this Warrant to vest with respect to the
Subsequent Shares. A failure by the Company to deliver the Notice to the Holder
pursuant to the terms of this Section shall constitute an election by the
Company to allow this Warrant to vest as to the Subsequent Shares pursuant to
the terms hereof. If the Company shall fail to pay the Cash Payment in full to
the Holder by the third (3rd) Trading Day from the Vesting Date at issue, then,
at the election of the Holder, the Company shall either (x) pay to the Holder
$5,000 per day until the Cash Payment and all additional payments due hereunder
are paid in full, or (y) allow this Warrant to vest with respect to the
Subsequent Shares.
(e) Notwithstanding the foregoing provisions of this Section 3, at
any time within ten (10) Trading Days following the occurrence of any of the
following events (each, an "Event"), the Holder shall have the option to elect
by notice ("Vesting Notice") to the Company to have this Warrant vest with
respect to those Warrant Shares that have not yet already vested:
(i) The occurrence of a Change of Control Transaction;
(ii) Immediately prior to an assignment by the Company for the
benefit of creditors or commencement of a voluntary case under the Federal
Bankruptcy Code, or an entering into of an order for relief in an involuntary
case under the Federal Bankruptcy Code, or adoption by the Company of a plan of
liquidation or dissolution;
(iii) Five (5) Business Days prior to the proposed
consummation with respect to the Company of a "Rule 13e-3 transaction" as
defined in Rule 13e-3 under the Exchange Act (or, if necessary, such earlier
date as the Company shall determine in good faith to be required in order for
the Holder to be able to participate in such transaction), it being agreed that
the Holder will receive actual notice of the 13e-3 Statement filed with the
Commission on the date filed and actual notice of the date of acceleration
hereunder no later than such date, and that if such transaction is not
consummated, and this Warrant has been exercised, then the Holder (and to the
extent that this Warrant would not but for this paragraph be exercisable, the
Company) shall be entitled to declare the exercise null and void and the Holder
shall, upon return of the Warrant Shares to the Company, be entitled to receive
a refund of the Exercise Price and warrants identical to this Warrant, and such
acceleration shall become void ab initio, and the Warrants shall (as to any
remaining unexercised portion thereof) remain in full force and effect in
accordance with the terms hereof;
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(iv) For any period of three (3) Trading Days (which need not
be consecutive Trading Days) commencing on or after the date of issuance of this
Warrant, there shall be no closing bid price on the Common Stock on the Nasdaq
or a Subsequent Market;
(v) The Common Stock fails to be listed or quoted for trading
on the Nasdaq or a Subsequent Market or for a period of three (3) Trading Days
(which need not be consecutive Trading Days);
(vi) A holder of Registrable Securities (as defined in the
Registration Rights Agreement) is not permitted to sell Registrable Securities
under an Underlying Shares Registration Statement for any reason for five (5) or
more days (whether or not consecutive); or
(vii) The Company shall fail or default in the timely
performance of any material obligation under the Transaction Documents and such
failure or default shall continue uncured for a period of five (5) Business Days
after the date on which notice of such failure or default is first given to the
Company (it being understood that no prior notice need be provided in the case
of defaults which cannot reasonably be cured within a 5-day period); provided
that no such failure or default shall be considered to have occurred for
purposes of this clause (vii) for a failure of an Underlying Shares Registration
Statement to be declared effective until the 150th day after the issuance of
this Warrant.
In the event the Holder delivers a Vesting Notice, this Warrant
shall vest with respect to the number of Warrant Shares calculated in accordance
with the formula set forth on Section 3(b); provided, however that for purposes
of such calculation, (i) the "Applicable Share Number" shall be deemed to mean
(A) 100% of the number of shares of Common Stock purchased by the Holder
pursuant to the Purchase Agreement (such number, the "Holder Purchased Shares"),
if the Event occurred prior to the First Vesting Date, (B) 66% of the Holder
Purchased Shares, if the Event occurred on or after the First Vesting Date but
prior to the Second Vesting Date and (C) 33% of the Holder Purchased Shares if
the Event occurred on or after the Second Vesting Date but prior to the Third
Vesting Date; and (ii) the "Adjustment Price" shall be deemed to mean the
average of the ten (10) lowest Per Share Market Values (which need not occur on
consecutive Trading Days) during the forty (40) Trading Days immediately
preceding the date on which the Event occurred.
(f) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 6:30 P.M., New
York City time, at any time and from time to time on or after the date hereof to
and including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.
(g) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares. If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
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purchase the remaining number of Warrant Shares for which no exercise has been
evidenced by this Warrant.
4. Delivery of Warrant Shares.
(a) Subject to Sections 2(b), 7 and 11, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 13 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than three (3) Trading Days after the Date
of Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends, except in the event that both an
Underlying Shares Registration Statement is not then effective and the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). Any person so designated by the Holder to receive Warrant Shares shall be
deemed to have become holder of record of such Warrant Shares as of the Date of
Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by the
third (3rd) Trading Day after the Date of Exercise, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for
each day after such third (3rd) Trading Day until such certificates are
delivered. Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon exercise within the period specified herein and the Holder
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law. The Company shall, upon request of the Holder, if available, use
its best efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.
(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates representing
the Warrant Shares pursuant to Section 4(a) by the third (3rd) Trading Day after
the Date of Exercise, and if after such third (3rd) Trading
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Day the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder was entitled to receive upon such exercise (a "Buy-In"),
then the Company shall pay (1) in cash to the Holder (in addition to any
remedies available to or elected by the Holder) the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the product of (A) the number of
Warrant Shares that the Company was required to deliver pursuant to Section 4(b)
to the Holder in connection with the exercise at issue and (B) the Per Share
Market Value at the time of the sale giving rise to such purchase obligation and
(2) deliver to the Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its exercise and delivery
obligations under Section 4(b). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with a market price on the date
of exercise in the amount of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In. Notwithstanding anything contained
herein to the contrary, if the Holder requires the Company to make payment in
respect of a Buy-In for the failure to timely deliver certificates hereunder and
the Company timely pays in full such payment, the Company shall not be required
to pay such Holder liquidated damages under Section 4(b) in respect of the
certificates resulting in such Buy-In.
(d) The Company's obligations to issue and deliver Warrant
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. If the Company breaches its obligations under this Warrant,
then, in addition to any other liabilities the Company may have hereunder and
under applicable law, the Company shall pay or reimburse the Holder on demand
for all costs of collection and enforcement (including reasonable attorneys fees
and expenses).
5. Piggyback Registration Rights. The Holder shall be entitled to the
piggyback registration rights afforded to a holder pursuant to Section 6(f) of
that certain Registration Rights Agreement dated as of the date hereof, among
the Company and the signatories thereto.
6. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons
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requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the reasonable satisfaction of the Company
that such tax has been paid. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 9). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9. Upon each such adjustment of the Exercise
Price pursuant to this Section 9, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is outstanding,
(i) shall pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or on any other class of capital stock payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a
larger number of shares, or (iii) combine outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
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 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 or combination, and shall apply to successive
subdivisions and combinations.
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(b) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder shall have the right thereafter
to exercise this Warrant only for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities, cash or property
as equals the number of Warrant Shares such Holder would have been entitled to
had the Holder exercised this Warrant in full immediately prior to such
reclassification or share exchange. This provision shall similarly apply to
successive reclassifications or share exchanges.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
9(a), (b) and (d)) (collectively, "Assets"), then in each such case, the Holder
shall be entitled to receive, for each Warrant Share with respect to which this
Warrant is exercised after the record date fixed for determination of
stockholders entitled to receive such distribution, the Assets received by all
holders of Common Stock with respect to one share of Common Stock.
(d) If, within 90 Trading Days of any Vesting Date, the Company or
any subsidiary thereof shall issue or cause to be issued rights, warrants, debt
or other securities entitling the holder thereof to acquire, or shall otherwise
sell or distribute shares of Common Stock or other securities, other than (i)
issuances pursuant to any exercise or conversion of any warrants, options,
subscriptions, convertible notes, convertible debentures, convertible preferred
stock or other convertible securities issued and outstanding on the Closing Date
(as defined in the Purchase Agreement) and set forth on Schedule 2.1(c) to the
Purchase Agreement in accordance with the terms of such securities as of such
date; (ii) issuances pursuant to any grant or exercise of any stock or options
which may hereafter be granted or exercised under any employee benefit plan of
the Company now existing or to be implemented in the future, or upon grant or
exercise of any stock or options to or by any officer, director or employee,
whether or not under a plan, so long as the issuance of such stock or options is
approved by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) issuances pursuant to any Closing
Warrants (as defined in the Purchase Agreement) issued pursuant to the Purchase
Agreement; (iv) securities issued in connection with an underwritten public
offering of the Company; (v) securities issued in connection with any merger,
acquisition or consolidation, or purchase of assets or business from another
person, so long as the Company is the surviving corporation and that such
transaction is not primarily for the purpose of raising capital, or (vi) in
connection with the issuance of Common Stock, not in excess of 1% of the Common
Stock issued and outstanding on the original issue date of this Warrant, upon
the exercise of warrants or other rights granted to any bank other commercial
financing institution, for a consideration per share less than both (x) the
market price at the time of such issuance or distribution and (y) an Adjustment
Price previously used in calculating the vesting of Warrant Shares on previous
Vesting Date (such an issuance, a "Discounted Issuance"), then the Adjustment
Price previously used in calculating the vesting of Warrant Shares on any
previous
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Vesting Date (if greater than such issuance price) shall equal the consideration
per share at which such Discounted Issuance was made and the Company shall,
within ten (10) Trading Days of such Discounted Issuance, issue to the Holder a
number of shares of Common Stock equal to the difference between the number of
Warrant Shares vested on any previous applicable Vesting Date based on the
Adjusted Price then in effect and the number of Warrant Shares which would have
vested on such previous Vesting Dates based on the imputed Adjustment Price
pursuant to the Discounted Issuance. Such adjustment shall be made successively
whenever such an issuance is made.
(e) In case of any (1) merger or consolidation of the Company with
or into another Person, or (2) sale by the Company of more than one-half of the
assets of the Company (on a book value basis) in one or a series of related
transactions, or (3) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, stock, cash or property of
the Company or another Person; then the Holder shall have the right thereafter
to (A) exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock for which this
Warrant could have been exercised immediately prior to such merger,
consolidation or sales would have been entitled, (B) in the case of a merger or
consolidation, require the surviving entity to issue to the Holder a warrant
entitling the Holder to acquire shares of such entity's common stock, which
warrant shall have terms identical (including with respect to exercise) to the
terms of this Warrant and shall be entitled to all of the rights and privileges
set forth herein and the agreements pursuant to which this Warrant was issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other
securities issuable upon exercise thereof), or (C) in the event of an exchange
or tender offer or other transaction contemplated by clause (3) of this Section,
tender or exchange this Warrant for such securities, stock, cash and other
property receivable upon or deemed to be held by holders of Common Stock that
have tendered or exchanged their shares of Common Stock following such tender or
exchange, and the Holder shall be entitled upon such exchange or tender to
receive such amount of securities, cash and property as the shares of Common
Stock for which this Warrant could have been exercised immediately prior to such
tender or exchange would have been entitled as would have been issued. In the
case of clause (B), the exercise price applicable for the newly issued warrant
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Exercise Price
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale, consolidation, tender or exchange shall include
such terms so as continue to give the Holder the right to receive the
securities, cash and property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly apply to
successive such events.
(f) For the purposes of this Section 9, the following clauses shall
also be applicable:
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(i) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(g) All calculations under this Section shall be made to the nearest
1/100th of a share.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) 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; or
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock of the
Company, 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, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 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 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
-11-
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 Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up; provided, however, 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.
10. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately
available funds; or
(b) Cashless Exercise. The Holder shall surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A where:
X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock on the principal market or exchange in which the
Common Stock is then listed or traded, as reported by
Bloomberg Information Systems, Inc. (or any successor to
its function of reporting stock prices), for the five
(5) trading days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. Certain Exercise Restrictions.
-12-
(a) The Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act of 1934 (the "Exchange Act") and the rules thereunder) in excess of
4.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon exercise of this Warrant after application of this Section.
The Holder shall have the sole authority and obligation to determine whether and
to what Warrant Shares the restriction contained in this Section applies. The
provisions of this Section may be waived by the Holder upon not less than 61
days prior notice to the Company.
(b) The Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 9.999% of the then issued
and outstanding Common Stock, including shares issuable upon exercise of this
Warrant after application of this Section. The Holder shall have the sole
authority and obligation to determine whether and to what Warrant Shares the
restriction contained in this Section applies. The provisions of this Section
may be waived by the Holder upon not less than 61 days prior notice to the
Company.
(c) If the Company Stock is then listed for trading on the
Nasdaq or the Nasdaq National Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 2,639,314 shares of Common Stock upon exercise of this Warrant, which
number of shares shall be subject to adjustment pursuant to Sections 9(a), (b),
(c) and (e) (such number of shares, the "Issuable Maximum"). The Issuable
Maximum equals 19.999% of the number of shares of Common Stock outstanding
immediately prior to the closing of transactions set forth in the Purchase
Agreement. If on any Date of Exercise (A) the Company Stock is listed for
trading on the Nasdaq or the Nasdaq National Market, (B) the Exercise Price then
in effect is such that the aggregate number of shares of Common Stock that would
then be issuable upon exercise in full of this Warrant, together with any shares
of Common Stock previously issued upon exercise of this Warrant, would equal or
exceed the Issuable Maximum, and (C) the Company shall not have previously
obtained the vote of shareholders, if any, as may be required by the applicable
rules and regulations of the Nasdaq Stock Market to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof (the "Shareholder Approval"), then the Company shall issue to the Holder
a number of shares of Common Stock equal to the Issuable Maximum and, with
respect to the shares whose issuance would result in an issuance of shares of
Common Stock in excess of the Issuable Maximum (the "Excess Warrant Shares"),
the Holder shall have the option to require the Company to either (1) use its
best efforts to obtain the Shareholder Approval applicable to such issuance as
soon as possible, but, in any event, no later than 60 days after such request or
(2) pay to the Holder an amount in cash equal to the product of (x) the Excess
Warrant Shares multiplied by (y) the closing sales price of the Common Stock on
(a) the date such Shareholder Approval was required to have been obtained or (b)
the Date of Exercise giving rise to the obligation to seek Shareholder Approval
(whichever is greater). The Company and the Holder understand and agree that
shares of Common Stock issued
-13-
upon exercise of the Warrant and then held by the Holder or an Affiliate thereof
may not cast votes or be deemed outstanding for purposes of any vote to obtain
the Shareholder Approval.
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service
with next day delivery specified thereon, or (iv) upon actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to 00-00 Xxx Xxxxxxx Xxxx, Xxxxx
0000, Xxx Xxxxxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000, attention
Chief Financial Officer, or (ii) if to the Holder, to the Holder at the address
or facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section 13.
-14-
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent.
(b) Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and the Holder
and their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-15-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FIDELITY HOLDINGS, INC.
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: President
-16-
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Fidelity Holdings, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Fidelity
Holdings, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
Dated: ______________, ____ Name of Holder:
(Print)_______________________________
(By:)_________________________________
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Fidelity Holdings,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Fidelity Holdings, Inc. with full power
of substitution in the premises.
Dated:
_________________, ____
_______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
___________________________
Exhibit A
(i) "Adjustment Price" means the average of the ten (10) lowest Per Share
Market Values (which need not occur on consecutive Trading Days) during the
forty (40) Trading Days immediately preceding either a (i) Vesting Date or (ii)
Trading Day, as applicable.
(ii) "Applicable Share Number" means (i) with respect to the First Vesting
Date, 34% of the number of shares of Common Stock purchased by the Holder
pursuant to the Purchase Agreement and (ii) with respect to each of the Second
Vesting Date and the Third Vesting Date, 33% of the number of shares of Common
Stock purchased by the Holder pursuant to the Purchase Agreement.
(iii) "Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
(iv) "Change of Control Transaction" means the occurrence of any of (1) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33.33% of the
voting securities of the Company, (2) a replacement at one time or over time of
more than one-half of the members of the Board which is not approved by a
majority of those individuals who are members of the Board on the date of
issuance of this Warrant (or by those individuals who are serving as members of
the Board on any date whose nomination to the Board was approved by a majority
of the members of the Board who are members on the date of issuance of this
Warrant), (3) the merger of the Company with or into another entity where the
directors comprising the Board immediately prior to such transaction (or the
first to occur of any series of related transactions) do not comprise a majority
of the members of the board of directors of the surviving company immediately
following such transaction, (4) the merger of the Company with or into another
entity where the shareholders of the Company immediately prior to such
transaction (or the first to occur of any series of related transactions) do not
collectively own in excess of 66.66% of the outstanding voting securities of the
surviving company immediately following such transaction, (5) the sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, (6) the merger by the Company with or into another entity where
the voting securities of the surviving company are not listed or quoted for
trading on the Nasdaq or on a Subsequent Market, or (7) the execution by the
Company of an agreement providing for any of the events set forth above in (1) -
(6).
(v) "Commission" means the Securities and Exchange Commission.
(vi) "Effectiveness Date" means the date the Underlying Shares
Registration Statement is declared effective by the Commission.
(vii) "Effectiveness Required Date" means the 120th day following the date
of issuance of this Warrant.
(viii) "Nasdaq" means the Nasdaq SmallCap Market.
(ix) "Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq or on any
Subsequent Market, or if there is no such price on such date, then the closing
bid price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the Common Stock is not then listed or quoted on
the Nasdaq or a Subsequent Market, the closing bid price for a share of Common
Stock in the over-the-counter market, as reported by the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an appraiser selected in good faith by the Holders
of a majority of the applicable Warrant Shares.
(x) "Purchase Agreement" means the Securities Purchase Agreement dated as
of the date hereof, between the Company and the original Holder hereof.
(xi) "Purchase Price" means $21.00.
(xii) "Securities" shall have the meaning set forth in the Purchase
Agreement.
(xiii) "Subsequent Market" shall mean any of the New York Stock Exchange,
Inc., American Stock Exchange, Inc. or Nasdaq National Market.
(xiv) "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock s not listed on the
Nasdaq or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean a Business Day.
(xv) "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
(xvi) "Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement dated as of the date hereof between the Company and the original
Holder hereof (the "Registration Rights Agreement") and covering the resale of
the Registrable Securities by the selling stockholders thereunder.
