Exhibit 1.2
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
June 15, 2001 by and between Valicert, Inc., a Delaware corporation (the
"Company") and Rellian Investments Limited (the "Purchaser"), a British Virgin
Islands corporation.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Purchaser from
time to time as provided herein, and Purchaser shall purchase, up to $50,000,000
of Common Stock and the Warrant; and
WHEREAS, such investments will be made by the Purchaser as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
Section 1.1. Purchase and Sale of Stock. Subject to the terms and
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conditions of this Agreement, the Company may sell and issue to the Purchaser
and the Purchaser shall be obligated to purchase from the Company, up to an
aggregate of, $50,000,000 of Common Stock (the "Commitment Amount") and the
Warrant, subject to the terms herein.
Section 1.2. Purchase Price and Initial Closing. The Company agrees to
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issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser agrees to purchase that number of the Shares to be
issued in connection with each Draw Down. The delivery of executed documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article I of the Escrow Agreement, attached as Exhibit
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B hereto, (the "Initial Closing") shall take place at the offices of Xxxxxxx
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Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (i) within
fifteen (15) days from the date hereof, or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Initial Closing
Date"). Each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.
Section 1.3. Liquidated Damages. The parties hereto acknowledge and
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agree that the sums payable pursuant to this Agreement for late delivery of the
Draw Down Shares
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shall constitute liquidated damages and not penalties. The parties further
acknowledge that (a) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (b) the amount specified in
such provisions bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by the Purchaser in
connection with the failure of the Company to deliver the Draw Down Shares in a
timely manner or the suspension of the Purchaser's rights to resell the Draw
Down Shares under the Registration Statement, and (c) the parties are
sophisticated businesses and have been represented by sophisticated and able
legal and financial counsel and negotiated this Agreement at arm's length.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representation and Warranties of the Company. Except as
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set forth in the SEC Documents or on the Disclosure Schedule prepared by the
Company and attached hereto, or as contemplated by this Agreement, the Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
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corporation duly incorporated validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate authority
to own, lease and operate its properties and assets and to carry on its
business as now being conducted. The Company does not have any
subsidiaries and does not own more than fifty percent (50%) of or control
any other business entity except as set forth in the SEC Documents. The
Company is duly qualified to do business and is in good standing as a
foreign corporation in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not
have a Material Adverse Effect.
(b) Authorization, Enforcement. (i) The Company has the
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requisite corporate power and corporate authority to enter into and perform
its obligations under the Transaction Documents and to issue the Draw Down
Shares pursuant to their respective terms, (ii) the execution and delivery
of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action and no further consent or authorization
of the Company or its Board of Directors or stockholders is required, and
(iii) the Transaction Documents have been duly executed and delivered by
the Company and at the Initial Closing shall constitute valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
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(c) Capitalization. The authorized capital stock of the
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Company consists of 100,000,000 shares of Common Stock of which 22,806,225
shares are issued and outstanding as of April 30, 2001 and 2,000,000
shares of Preferred Stock of which none are issued and outstanding. All of
the outstanding shares of the Company's Common Stock have been duly and
validly authorized and are fully paid and non-assessable. Except as set
forth in the SEC Documents, no shares of Common Stock are entitled to
preemptive rights or registration rights and there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible
into, any shares of capital stock of the Company. Except as set forth in
the SEC Documents, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue
additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the
Company. Except as set forth in the SEC Documents, the Company is not a
party to any agreement granting registration rights to any person with
respect to any of its equity or debt securities. The Company is not a party
to, and it has no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. The Company has
made available to the Purchaser true and correct copies of the Company's
articles or certificate of incorporation as in effect on the date hereof
(the "Charter"), and the Company's bylaws as in effect on the date hereof
(the "Bylaws"). The Company has not received any notice from the Principal
Market questioning or threatening the continued inclusion of the Common
Stock on such market.
(d) Issuance of Shares. The Warrant Shares to be issued under
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this Agreement have been duly authorized by all necessary corporate action
and, when paid for and issued in accordance with the terms hereof and the
Warrant, the Warrant Shares shall be validly issued and outstanding, fully
paid and non-assessable, and the Purchaser shall be entitled to all rights
accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of
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this Agreement by the Company and the consummation by the Company of the
transactions contemplated herein do not and will not (i) violate any
provision of the Company's Charter or Bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party, (iii) create or
impose a lien, charge or encumbrance on any property of the Company under
any agreement or any commitment to which the Company is a party or by which
the Company is bound or by which any of its respective properties or assets
are bound, or (iv) result in a violation of any federal, state, local or
other foreign statute, rule, regulation, order, judgment or decree
(including any federal or state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset
of the Company or any of its subsidiaries are bound or affected, except, in
all cases, for such conflicts, defaults, termination, amendments,
accelerations, cancellations and violations as would not, individually or
in the aggregate, have a Material Adverse Effect. The business of the
Company and its subsidiaries is not being conducted in violation of any
laws, ordinances or regulations of any governmental
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entity, except for violations which singularly or in the aggregate do not
and will not have a Material Adverse Effect. The Company is not required
under any federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under this Agreement, or issue and sell
the Shares in accordance with the terms hereof (other than any filings
which may be required to be made by the Company with the SEC or state
securities administrators and any registration statement which may be filed
pursuant hereto); provided, however, that for purpose of the
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representations made in this sentence, the Company is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Purchaser herein.
(f) SEC Documents, Financial Statements. The Common Stock
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of the Company is registered pursuant to Section 12(g) of the Exchange Act,
and, the Company is current with all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act. The Company has
delivered or made available to the Purchaser, through the XXXXX system or
otherwise, true and complete copies of the SEC Documents filed with the SEC
since July __, 2000. The Company has not provided to the Purchaser any
information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. As of their respective filing dates, the SEC Documents complied
in all material respects with the requirements of the Exchange Act or the
Securities Act, as applicable, and the rules and regulations of the SEC
promulgated thereunder applicable to such documents, and, as of their
respective filing dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements under GAAP and the published rules and regulations of the SEC
or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with GAAP applied on
a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary statements), and
fairly present in all material respects the financial position of the
Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The SEC Documents or the Disclosure
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Schedule attached hereto sets forth each significant subsidiary as defined
in Section 210.1-02(w) of Regulation S-X of the Company (a "Significant
Subsidiary"), showing the jurisdiction of its incorporation or organization
and showing the percentage of the Company's ownership of the outstanding
stock or other interests of such Significant Subsidiary. For
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the purposes of this Agreement, "subsidiary" shall mean any corporation or
other entity of which at least a majority of the securities or other
ownership interests having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the
Company and/or any of its other subsidiaries. All of the issued and
outstanding shares of capital stock of each Significant Subsidiary have
been duly authorized and validly issued, and are fully paid and non-
assessable. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding
upon any Significant Subsidiary or the purchase or acquisition of any
shares of capital stock of any Significant Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Significant Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Significant Subsidiary or any convertible securities,
rights, warrants or options of the type described in the preceding
sentence. Neither the Company nor any Significant Subsidiary is a party to,
nor has any knowledge of, any agreement restricting the voting or transfer
of any shares of the capital stock of any Significant Subsidiary.
(h) No Material Adverse Effect. Since the date of the
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financial statement contained in the most recently filed Form 10-Q (or 10-
QSB) or Form 10-K (or 10-KSB), whichever is most current, no Material
Adverse Effect has occurred or exists with respect to the Company, except
as disclosed in the SEC Documents or on the Disclosure Schedule attached
hereto.
(i) No Undisclosed Liabilities. Except as disclosed in the
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SEC Documents or on the Disclosure Schedule attached hereto, neither the
Company nor any of its subsidiaries has any liabilities, obligations,
claims or losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) that would be required to be
disclosed on a balance sheet of the Company or any Significant Subsidiary
(including the notes thereto) in conformity with GAAP which are not
disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company's or its subsidiaries' respective businesses since
such date and which, individually or in the aggregate, do not or would not
have a Material Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Since the date of
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the financial statement contained in the most recently filed Form 10- Q (or
10-QSB) or Form 10-K (or 10-KSB), whichever is most current, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been
so publicly announced or disclosed in the SEC Documents.
(k) Indebtedness. The SEC Documents or the Disclosure
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Schedule attached hereto sets forth as of the date hereof all outstanding
secured and unsecured
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Indebtedness of the Company or any Significant Subsidiary, or for which the
Company or any Significant Subsidiary has commitments. For the purposes of
this Agreement, "Indebtedness" shall mean (A) any liabilities for borrowed
money or amounts owed in excess of $500,000 (other than trade accounts
payable incurred in the ordinary course of business), (B) all guaranties,
endorsements and contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company's
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business; and (C) the present value of any lease
payments in excess of $500,000 due under leases required to be capitalized
in accordance with GAAP. Neither the Company nor any Significant Subsidiary
is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries
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has good and marketable title to all of its real and personal property
reflected in the SEC Documents, free of any mortgages, pledges, charges,
liens, security interests or other encumbrances, except for those indicated
in the SEC Documents or such that do not cause a Material Adverse Effect.
All said real property leases of the Company and each of its subsidiaries
are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim,
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investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Significant Subsidiary which
questions the validity of this Agreement or the transactions contemplated
hereby or any action taken or to be taken pursuant hereto or thereto. There
is no action, suit, claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company, any
Significant Subsidiary or any of their respective properties or assets,
which action, suit, claim, investigation or proceeding would have a
Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Significant Subsidiary except
those orders, judgments, injunctions, awards or decrees which would not
have a Material Adverse Effect.
(n) Compliance with Law. The Company and each of its
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subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of their respective businesses as now being conducted by them
unless the failure to possess such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals,
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
(o) Taxes. The Company and each Significant Subsidiary has
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filed all Tax Returns which it is required to file under applicable laws;
all such Tax Returns are true and accurate in all material respect, and
have been prepared in compliance with all applicable laws; except as set
forth in the SEC Documents the Company has paid all Taxes due and owing by
it or any Significant Subsidiary (whether or not such Taxes are
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required to be shown on a Tax Return) and has withheld and paid over to the
appropriate taxing authorities all Taxes which it is required to withhold
from amounts paid or owing to any employee, stockholder, creditor or other
third parties; and since December 31, 1999, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions
for deferred income taxes) reflected on the books of the Company are to its
knowledge adequate to cover any Tax liabilities of the Company if its
current tax year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any
Significant Subsidiary is or may be subject to taxation by that
jurisdiction. Except as set forth in the SEC Documents, there are no
foreign, federal, state or local tax audits or administrative or judicial
proceedings pending or being conducted with respect to the Company or any
Significant Subsidiary; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and,
except as disclosed above, no written notice indicating an intent to open
an audit or other review has been received by the Company or any
Significant Subsidiary from any foreign, federal, state or local taxing
authority. Except as set forth in the SEC Documents, there are no material
unresolved questions or claims concerning the Company's Tax liability. The
Company (A) has not executed or entered into a closing agreement pursuant
to (S) 7121 of the Internal Revenue Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; and (B)
has not agreed to or is required to make any adjustments pursuant to (S)
481 (a) of the Internal Revenue Code or any similar provision of state,
local or foreign law by reason of a change in accounting method initiated
by the Company or any of its subsidiaries or has any knowledge that the IRS
has proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of (S) 897(c)(2) of the Internal Revenue
Code during the applicable period specified in (S) 897(c)(1)(A)(ii) of the
Internal Revenue Code.
The Company has not made an election under (S)341 (f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a Significant Subsidiary of the Company under (A) Treas.
Reg. (S) 1.1502-6 (or comparable provisions of state, local or foreign
law), (B) as a transferee or successor, (C) by contract or indemnity or (D)
otherwise. The Company is not a party to any tax sharing agreement. The
Company has not made any payments, is not obligated to make payments nor is
it a party to an agreement that could obligate it to make any payments that
would not be deductible under (S) 280G of the Internal Revenue Code.
For purposes of this Section 2.1(o):
"IRS" means the United States Internal Revenue Service.
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"Tax" or "Taxes" means federal, state, county, local, foreign, or
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other income, gross receipts, ad valorem, franchise, profits,
sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment,
social security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether
disputed or not.
"Tax Return" means any return, information report or filing with
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respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
(p) Certain Fees. Except for the fees paid to Pacific Crest
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Securities, Inc. pursuant to the Escrow Agreement, no brokers, finders or
financial advisory fees or commissions will be payable by the Company or
any Significant Subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Operation of Business. The Company and each of the
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subsidiaries owns or possesses all patents, trademarks, service marks,
trade names, copyrights, licenses and authorizations as set forth in the
SEC Documents or the Disclosure Schedule attached hereto, and all rights
with respect to the foregoing, which to its knowledge would be reasonably
necessary for the conduct of its business as now conducted without any
conflict with the rights of others.
(r) Books and Records. The records and documents of the Company
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and its subsidiaries accurately reflect in all material respects the
information relating to the business of the Company and the subsidiaries,
the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Significant Subsidiary.
(s) Material Agreements. The Company and each of its
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subsidiaries has in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements,
have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement (as first filed
under Item 601(10) of Regulation S-K) which are now in effect, the result
of which would cause a Material Adverse Effect. Except as set forth in the
SEC Documents, no written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement of the Company or of any
Significant Subsidiary limits or shall limit the payment of dividends on
the Company's Common Stock.
(t) Transactions with Affiliates. There are no loans, leases,
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agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions exceeding $100,000 between
(A) the Company, any Significant Subsidiary or any of their respective
customers or suppliers on the one hand, and (B) on the other hand, any
officer, employee, consultant or director of the Company,
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or any of its subsidiaries, or any person owning 5% or more of the capital
stock of the Company or any Significant Subsidiary or any member of the
immediate family of such officer, employee, consultant, director or
stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder.
(u) Securities Laws. The Company has complied and will comply
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with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Shares hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell,
offer to sell or solicit offers to buy the Shares or similar securities to,
or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other than
the Purchaser), so as to bring the issuance and sale of the Shares under
the registration provisions of the Securities Act and applicable state
securities laws. Neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer or sale of the
Shares.
(v) Employees. Neither the Company nor any Significant
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Subsidiary has any collective bargaining arrangements or agreements
covering any of its employees. Neither the Company nor any Significant
Subsidiary is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, to be employed
or engaged by the Company or such Significant Subsidiary. Since the date of
the March 31, 2001 Form 10-Q, no officer, consultant or key employee of the
Company or any Significant Subsidiary whose termination, either
individually or in the aggregate, could have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has indicated any present
intention of terminating his or her employment or engagement with the
Company or any Significant Subsidiary.
(w) Absence of Certain Developments. Except as set forth in the
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Disclosure Schedule since the date of the financial statement contained in
the most recently filed Form 10-Q (or 10-QSB) or Form 10-K (or 10KSB),
whichever is most current, neither the Company nor any Significant
Subsidiary has:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the ordinary
course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of the
Company's or such Significant Subsidiary's business;
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(iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased
or redeemed, or made any agreements so to purchase or redeem, any
shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of
business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible
assets or intellectual property rights, or disclosed any proprietary
confidential information to any person except to customers in the
ordinary course of business or to the Purchaser or its
representatives;
(vii) suffered any material losses (except for anticipated
losses consistent with prior quarters) or waived any rights of
material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $500,000;
(x) entered into any other material transaction, whether or
not in the ordinary course of business;
(xi) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xii) experienced any material problems with labor or
management in connection with the terms and conditions of their
employment; or
(xiii) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its
subsidiaries.
(x) Governmental Approvals. Except for the filing of any notice
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prior or subsequent to any Settlement Date that may be required under
applicable federal or state securities laws (which if required, shall be
filed on a timely basis), including the filing of a registration statement
or post-effective amendment pursuant to this Agreement, no authorization,
consent, approval, license, exemption of, filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality,
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domestic or foreign, is or will be necessary for, or in connection with,
the delivery of the Shares, or for the performance by the Company of its
obligations under this Agreement.
(aa) Acknowledgment Regarding Purchaser's Purchase of Shares.
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Company acknowledges and agrees that Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that
the Purchaser is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereunder. The Company further represents to the
Purchaser that the Company's decision to enter into this Agreement has been
based solely on (a) the Purchaser's representations and warranties in
Section 2.2, and (b) the independent evaluation by the Company and its own
representatives and counsel.
Section 2.2. Representations and Warranties of the Purchaser. The
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Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The
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Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the British Virgin Islands.
(b) Authorization and Power. The Purchaser has the
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requisite power and authority to enter into and perform the Transaction
Documents and to purchase the Shares being sold to it hereunder. The
execution, delivery and performance of the Transaction Documents by
Purchaser and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and at
the Initial Closing shall constitute valid and binding obligations of the
Purchaser enforceable against the Purchaser in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application
(c) No Conflicts. The execution, delivery and performance
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of this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of the Purchaser's charter documents or bylaws or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument to which the Purchaser is a party, or result in a
violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties (except for such conflicts, defaults and violations as would
not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser). The Purchaser is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or
11
governmental agency in order for it to execute, deliver or perform any of
its obligations under this Agreement or to purchase the Shares in
accordance with the terms hereof.
(d) Financial Risks. The Purchaser acknowledges that it is
---------------
able to bear the financial risks associated with an investment in the
Shares and that it has been given full access to such records of the
Company and the subsidiaries and to the officers of the Company and the
subsidiaries as it has deemed necessary or appropriate to conduct its due
diligence investigation. The Purchaser is capable of evaluating the risks
and merits of an investment in the Shares by virtue of its experience as an
investor and its knowledge, experience, and sophistication in financial and
business matters and the Purchaser is capable of bearing the entire loss of
its investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited
-------------------
investor" as defined in Regulation D promulgated under the Securities Act.
(f) General. The Purchaser understands that the Company is
-------
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth
herein in order to determine the suitability of the Purchaser to acquire
the Shares.
ARTICLE 3
COVENANTS
The Company covenants with the Purchaser as follows:
Section 3.1. The Shares. As of the date of each applicable Draw Down,
----------
the Company will have authorized and reserved, free of preemptive rights, a
sufficient number of authorized but unissued shares of its Common Stock to cover
the Draw Down Shares to be issued in connection with such Draw Down requested
under this Agreement. The Draw Down Shares to be issued under this Agreement,
when paid for and issued in accordance with the terms hereof, shall be duly and
validly issued and outstanding, fully paid and non-assessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock. Anything
in this Agreement to the contrary notwithstanding, (i) at no time will the
Company request a Draw Down which would result in the issuance of an aggregate
number of shares of Common Stock pursuant to this Agreement which exceeds 19.9%
of the number of shares of Common Stock issued and outstanding on the Initial
Closing Date without obtaining stockholder approval of such excess issuance, or
such other amount as would require stockholder approval under rules of the
Principal Market or otherwise without obtaining stockholder approval of such
excess issuance, and (ii) the Company may not make a Draw Down to the extent
that, after such purchase by the Purchaser, the sum of the number of shares of
Common Stock beneficially owned by the Purchaser and its affiliates would result
in beneficial ownership by the Purchaser and its affiliates of more than 9.9% of
the then outstanding shares of Common Stock. For
12
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act.
Section 3.2. Securities Compliance. If applicable, the Company shall
---------------------
notify the Principal Market, in accordance with its rules and regulations, of
the transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Shares and the
Warrant to the Purchaser or subsequent holders.
Section 3.3. Registration and Listing. The Company will cause its
------------------------
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all material respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this Agreement, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the Exchange Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act, except as permitted
herein. The Company will take all action reasonably necessary to continue the
listing or trading of its Common Stock on the Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Principal Market and shall provide the Purchaser with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within three (3) Trading Days of the
Company's receipt thereof, until the Purchaser has disposed of all of the
Shares.
Section 3.4. Escrow Arrangement. The Company and the Purchaser shall
------------------
enter into an escrow arrangement with Xxxxxxx Xxxxxx & Green, P.C. (the "Escrow
Agent") in the form of Exhibit B hereto respecting payment against delivery of
---------
the Shares.
Section 3.5. Registration Rights Agreement. The Company and the
-----------------------------
Purchaser shall enter into the Registration Rights Agreement in the Form of
Exhibit A hereto. Before the Purchaser shall be obligated to accept a Draw Down
---------
request from the Company, the Company shall have caused a sufficient number of
shares of Common Stock to be registered to cover the Shares to be issued in
connection with such Draw Down.
Section 3.6. Accuracy of Registration Statement. On each Settlement
----------------------------------
Date, the Registration Statement and the prospectus therein shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made;
and on such Settlement Date or date of filing the Registration Statement and the
prospectus therein will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, the Company makes no representations or warranties as to the
-------- -------
information contained in or omitted from the Registration Statement and the
prospectus therein in reliance upon and in conformity with the information
13
furnished in writing to the Company by the Purchaser specifically for inclusion
in the Registration Statement and the prospectus therein.
Section 3.7. Compliance with Laws. The Company shall comply, and
--------------------
cause each Significant Subsidiary to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
Section 3.8. Keeping of Records and Books of Account. The Company
---------------------------------------
shall keep and cause each Significant Subsidiary to keep adequate records and
books of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.9. Other Agreements. The Company shall not enter into any
----------------
agreement the terms of which would restrict or impair the ability of the Company
to perform its obligations under this Agreement.
Section 3.10. Notice of Certain Events Affecting Registration;
------------------------------------------------
Suspension of Right to Request a Draw Down. The Company will promptly notify the
------------------------------------------
Purchaser in writing upon the occurrence of any of the following events in
respect of the Registration Statement or related prospectus in respect of the
Shares: (i) receipt of any request for additional information from the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement the response to which would require
any amendments or supplements to the Registration Statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; provided, however
that the Company shall not be required to deliver such notice if doing so would
violate any Federal or State Securities Laws. The Company shall not deliver to
the Purchaser any Draw Down Notice during the continuation of any of the
foregoing events. The Company shall promptly make available to the Purchaser any
such supplements or amendments to the related prospectus, at
14
which time, provided that the registration statement and any supplements and
amendments thereto are then effective, the Company may recommence the delivery
of Draw Down Notices.
Section 3.11. Consolidation; Merger. The Company shall not, at any
---------------------
time after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all of the assets of the
Company to, another entity (a "Consolidation Event") unless the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
or by operation of law the obligation to deliver to the Purchaser such shares of
stock and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 3.12. Limitation on Future Financing. The Company agrees that
------------------------------
it will not enter into another stand-by equity based credit facility during the
36 consecutive months immediately following the Effective Date, unless this
agreement is terminated pursuant to Section 6.2(b)(i), in which case this
provision will be of no further force and effect.
Section 3.13. Use of Proceeds. The proceeds from the sale of the
---------------
Shares will be used by the Company and its subsidiaries for general corporate
purposes.
The Purchaser covenants with the Company as follows:
Section 3.14. Compliance with Law. The Purchaser agrees that its
-------------------
trading activities with respect to shares of the Company's Common Stock will be
in compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of the Principal Market on which the
Company's Common Stock is listed. Without limiting the generality of the
foregoing, the Purchaser agrees that it will, whenever required by federal
securities laws, deliver the prospectus included in the Registration Statement
to any purchaser of Shares from the Purchaser.
Section 3.15. No Short Sales. The Purchaser and its affiliates shall
--------------
not engage in short sales of the Company's Common Stock (as defined in
applicable SEC rules and the Principal Market rules) during the term of this
Agreement.
ARTICLE 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. Conditions Precedent to the Obligation of the Company
-----------------------------------------------------
to Sell the Shares. The obligation hereunder of the Company to proceed to close
------------------
this Agreement and to issue and sell the Shares to the Purchaser is subject to
the satisfaction or waiver, at or before the Initial Closing, and as of each
Settlement Date of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchaser's Representations and
-----------------------------------------------
Warranties. The representations and warranties of the Purchaser shall be
----------
true and correct in all material
15
respects as of the date when made and as of the Initial Closing and as of
each Settlement Date as though made at that time, except for
representations and warranties that speak as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have
----------------------------
performed, satisfied and complied in all material respects with all
material covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Purchaser at or prior to
the Initial Closing and as of each Settlement Date.
(c) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 4.2. Conditions Precedent to the Obligation of the Purchaser
-------------------------------------------------------
to Close. The obligation hereunder of the Purchaser to perform its obligations
--------
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and
---------------------------------------------
Warranties. Each of the representations and warranties of the Company shall
----------
be true and correct in all material respects as of the date when made and
as of the Initial Closing as though made at that time (except for
representations and warranties that speak as of a particular date).
(b) Performance by the Company. The Company shall have
--------------------------
performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Initial
Closing.
(c) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or
----------------------------
proceeding before any arbitrator or any governmental authority shall have
been commenced, and no investigation by any governmental authority shall
have been threatened, against the Purchaser or the Company or any
Significant Subsidiary, or any of the officers, directors or affiliates of
the Company or any Significant Subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages
in connection with such transactions.
16
(e) Opinion of Counsel, Etc. At the Initial Closing, the
-----------------------
Purchaser shall have received an opinion of counsel to the Company, dated
as of the Initial Closing Date, in the form of Exhibit C hereto.
---------
(f) Warrant. On the Initial Closing Date, the Company shall
-------
issue to the Purchaser a warrant to purchase up to 100,000 shares of Common
Stock. The Warrant shall have a term from its initial date of exercise of 3
years. The exercise price of the Warrant shall be 125% of the average of
the VWAPs during the 15 Trading Days immediately prior to the Initial
Closing Date. The Common Stock underlying the Warrant will be registered in
the Registration Statement referred to in Section 4.3 hereof. The Warrant
shall be in the form of Exhibit E hereto.
---------
Section 4.3. Conditions Precedent to the Obligation of the Purchaser
-------------------------------------------------------
to Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
---------------------------------------------
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction at or before each Settlement Date, of each of the
conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The
---------------------------------------------
Company shall have satisfied, or the Purchaser shall have waived at the
Initial Closing, the conditions set forth in Section 4.2 hereof
(b) Effective Registration Statement. The Registration
--------------------------------
Statement registering the Shares shall have been declared effective by the
SEC and shall remain effective on each Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock
-------------
shall not have been suspended by the SEC or the Principal Market (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the delivery of each Draw
Down Notice), and, at any time prior to such Draw Down Notice, trading in
securities generally as reported on the Principal Market shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported on the Principal Market
unless the general suspension or limitation shall have been terminated
prior to the delivery of such Draw Down Notice.
(d) Material Adverse Effect. No Material Adverse Effect and
-----------------------
no Consolidation Event where the successor entity has not agreed to perform
the Company's obligations shall have occurred, such occurrences to be
determined in accordance with Section 8.9 herein.
(e) Opinion of Counsel. The Purchaser shall have received
------------------
(i) a "down-to-date" letter from the Company's counsel, confirming that
there is no change from the counsel's previously delivered opinion, or else
specifying with particularity the reason for any change and an opinion as
to the additional items specified in Exhibit C hereto, and (ii) any other
---------
items set forth in the Escrow Agreement.
17
ARTICLE 5
DRAW DOWN TERMS
Section 5.1. Draw Down Terms. Subject to the satisfaction of the
---------------
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company may, in its sole discretion, issue and
exercise draw downs (each a "Draw Down") during the Commitment Period,
which Draw Downs the Purchaser shall be obligated to accept, subject to the
terms and conditions herein.
(b) Only one Draw Down shall be allowed in each Draw Down
Pricing Period. There shall be a minimum of one (1) Trading Day between
Draw Down Pricing Periods. The number of shares of Common Stock purchased
by the Purchaser with respect to each Draw Down shall be determined as set
forth in Section 5.1(e) herein and settled on:
(i) as to the 1/st/ through the 10/th/ Trading Day
during the Draw Down Pricing Period, on or before the 12/th/ Trading
Day after such Draw Down Pricing Period commences; and
(ii) as to the 11/th/ through the 20/th/ Trading Day
during the Draw Down Pricing Period commences, on or before the 22nd
Trading Day after such Draw Down Pricing Period (such settlement
periods and such settlement dates in subsection (i) and this
subsection (ii) each referred to as a "Settlement Period" and a
"Settlement Date", respectively).
(c) In connection with each Draw Down Pricing Period, the
Company may set the Threshold Price in the Draw Down Notice.
(d) The minimum Investment Amount for any Draw Down shall be
$250,000 and the maximum Investment Amount as to each Draw Down shall be 6%
of the EQY weighted average price field (as reported on Bloomberg Financial
L.P. using the BLPH function) for the Common Stock for the 60 calendar days
immediately prior to the applicable Commencement Date (defined below)
multiplied by the total trading volume in respect of the Common Stock for
such period; provided, however, that in the event that The Nasdaq Stock
-------- -------
Market, Inc. shall publish an official published release altering the
manner in which its members may report the sale of their securities listed
thereon, the formula set forth in the foregoing sentence shall be adjusted
accordingly. Notwithstanding anything herein to the contrary, in the event
the minimum Investment Amount is greater than the maximum Investment
Amount, as to such Draw Down only, the minimum Investment Amount shall
equal the maximum Investment Amount, but in no event shall the minimum
Investment Amount be less than $100,000, such that if the maximum
Investment Amount is less than $100,000, then the Company shall be
precluded from exercising a Draw Down at such time.
18
(e) The number of Shares of Common Stock to be issued on each
Settlement Date shall be a number of shares equal to the sum of the
quotients (for each trading day within the Settlement Period) of (x)
1/20/th/ of the Investment Amount, and (y)the Purchase Price on each
Trading Day within the Settlement Period, subject to the following
adjustments:
(i) if the VWAP on a given Trading Day is less than the
Threshold Price, then that portion of the Investment Amount to be paid
on the immediately pending Settlement Date shall be reduced by
1/20/th/ of the Investment Amount and such Trading Day shall be
withdrawn from the Settlement Period;
(ii) if during any Trading Day during the Settlement
Period trading of the Common Stock on the Principal Market is
suspended for more than three (3) hours, in the aggregate, or if any
Trading Day during the Settlement Period is shortened because of a
public holiday, then that portion of the Investment Amount to be paid
on the immediately pending Settlement Date shall be reduced by
1/20/th/ of the Investment Amount and such Trading Day shall be
withdrawn from the Settlement Period; and
(iii) if during any Trading Day during the Settlement
Period sales of Draw Down Shares pursuant to the Registration
Statement are suspended by the Company in accordance with Sections
3(j) or 5(e) of the Registration Rights Agreement for more than three
(3) hours, in the aggregate, during the Settlement Period, then that
portion of the Investment Amount to be paid on the immediately pending
Settlement Date shall be reduced by 1/20/th/ of the Investment Amount
and such Trading Day shall be withdrawn from the Settlement Period.
(f) The Company must inform the Purchaser by delivering a draw
down notice, in the form of Exhibit D hereto (the "Draw Down Notice"), via
---------
facsimile transmission in accordance with Section 8.4 as to the amount of
the Draw Down (the "Investment Amount") the Company wishes to exercise,
before the first day of the Draw Down Pricing Period (the "Commencement
Date"). If the Commencement Date is to be the date of the Draw Down Notice,
the Draw Down Notice must be delivered to and receipt confirmed by the
Purchaser at least one (1) hour before trading commences on such date. At
no time shall the Purchaser be required to purchase more than the maximum
Investment Amount for a given Draw Down Pricing Period so that if the
Company chooses not to exercise the maximum Investment Amount in a given
Draw Down Pricing Period the Purchaser is not obligated to and shall not
purchase more than the scheduled maximum Investment Amount in a subsequent
Draw Down Pricing Period.
(g) On each Settlement Date, the Shares purchased by the
Purchaser shall be delivered to The Depository Trust Company ("DTC") on the
Purchaser's behalf. Upon the Company electronically delivering whole shares
of Common Stock to the Purchaser or its designees via DTC through its
Deposit Withdrawal Agent Commission
19
("DWAC") system by 1:00 p.m. EST, the Purchaser shall wire transfer
immediately available funds to the Company's designated account on such
day, less any fees as set forth in the Escrow Agreement, which fees shall
be wired as directed in the Escrow Agreement. Upon the Company
electronically delivering whole shares of Common Stock to the Purchaser or
its designees DTC account via DWAC after 1:00 p.m. EST, the Purchaser shall
wire transfer next day available funds to the Company's designated account
on such day, less any fees as set forth in the Escrow Agreement, which fees
shall be wired as directed in the Escrow Agreement. In the event that
either party elects to use the Escrow Agent, the Shares shall be credited
by the Company to the DTC account designated by the Purchaser via DWAC upon
receipt by the Escrow Agent of payment for the Draw Down Shares into the
Escrow Agent's master escrow account, as further set forth in the Escrow
Agreement. The Escrow Agent shall be directed to pay the purchase price to
the Company, net of $1,000 per Settlement as escrow expenses to the Escrow
Agent and any additional fees as set forth in the Escrow Agreement. The
Company understands that a delay in the delivery of the Draw Down Shares
into the Purchaser's DTC account beyond 3 Trading Days after the dates set
forth herein or in the Escrow Agreement, as the case may be, could result
in economic loss to the Purchaser. Notwithstanding anything herein to the
contrary, as compensation to the Purchaser for such loss, the Company
agrees to pay late payments to the Purchaser for late delivery after 3
Trading Days from such dates in accordance with the following schedule
(where "No. Trading Days Late" is defined as the number of Trading Days
beyond three 3 Trading Days from the dates set forth herein or in the
Escrow Agreement, as the case may be, on which such Draw Down Shares are to
be delivered into the Purchaser's DTC account via the DWAC system):
--------------------------------------------------------------------------------
No. Trading Days Xxxx Xxxx Payment for Each
$5,000 of Draw Down Shares
Being Purchased
--------------------------------------------------------------------------------
1 $100
--------------------------------------------------------------------------------
2 $200
--------------------------------------------------------------------------------
3 $300
--------------------------------------------------------------------------------
4 $400
--------------------------------------------------------------------------------
5 $500
--------------------------------------------------------------------------------
6 $600
--------------------------------------------------------------------------------
7 $700
--------------------------------------------------------------------------------
8 $800
--------------------------------------------------------------------------------
9 $900
--------------------------------------------------------------------------------
10 $1,000
--------------------------------------------------------------------------------
More than 10 $1,000 +$200 for each Trading
Day Late beyond 10 Trading Days
--------------------------------------------------------------------------------
20
The Company shall pay any payments incurred under this Section
5.1(g) in immediately available funds upon demand. Nothing herein shall
limit the Purchaser's right to pursue injunctive relief and/or actual
damages for the Company's failure to issue and deliver the Draw Down Shares
to the Company, including, without limitation, the Purchaser's actual
losses occasioned by any "buy-in" of Common Stock necessitated by such late
delivery.
ARTICLE 6
TERMINATION
Section 6.1. Term. The term of this Agreement shall begin on the
----
date hereof and shall end on the earlier of 36 months from the Effective Date or
as otherwise set forth in Section 6.2.
Section 6.2. Other Termination.
-----------------
(a) This Agreement shall terminate upon one (1) Trading
Day's notice if (i) an event resulting in a Material Adverse Effect has
occurred and has not been cured for a period of sixty (60) days after
giving written notice thereof, (ii) the Common Stock is de-listed from the
Principal Market unless such de-listing is in connection with the Company's
subsequent listing of the Common Stock on the Nasdaq National Market,
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, or (iii) the Company files for protection from creditors under
any applicable law.
(b) The Company may terminate this Agreement (i) upon one
(1) Trading Day's notice if the Purchaser shall fail to fund more than one
properly noticed Draw Down within five (5) Trading Days of the end of the
applicable Settlement Period, or (ii) upon 45 Trading Days' notice;
provided, however, as to subsection (ii), at the time notice is delivered,
-------- -------
there are no pending Settlements and the Company does not issue a Draw Down
Notice during such notice period.
Section 6.3. Effect of Termination. In the event of termination of
---------------------
this Agreement pursuant to Section 6.2 herein, written notice thereof shall
forthwith be given to the other party and the transactions contemplated by this
Agreement shall be terminated without further action by either party. If this
Agreement is terminated as provided in Section 6.1 or 6.2 herein, this Agreement
shall become void and of no further force and effect, except for Sections 3.12,
8.1, 8.2 and 8.9, and Article 7 herein, which shall survive the termination of
this Agreement. Nothing in this Section 6.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights of the Company or the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
21
ARTICLE 7
INDEMNIFICATION
Section 7.1. General Indemnity.
(a) The Company agrees to indemnify and hold harmless the
Purchaser (and its directors, officers, affiliates, agents, successors and
assigns) from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Purchaser as a
result of any material inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein.
(b) The Purchaser agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and
assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Company as
result of any material inaccuracy in or breach of the representations,
warranties or covenants made by the Purchaser herein. Notwithstanding
anything to the contrary herein, the Purchaser shall be liable under this
Section 7.1(b) for only that amount as does not exceed the net proceeds to
the Purchaser as a result of the sale of the Shares; provided, however,
-------- -------
that this provision shall not limit any rights or claims based on
fraudulent or intentional misrepresentation, bad faith or willful
misconduct.
Section 7.2. Indemnification Procedure. Any party entitled to
-------------------------
indemnification under this Article 7 (an "Indemnified Party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article 7 except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
(including reasonable attorneys' fees, charges and disbursements) and expenses
arising out of the defense, settlement or compromise of
22
any such action, claim or proceeding shall be losses subject to indemnification
hereunder. The Indemnified Party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party, which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article 7 to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent (which
consent shall not be unreasonably withheld), settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the Indemnified Party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim. The
indemnification required by this Article 7 shall be made by periodic payments of
the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, within ten
(10) Trading Days of written notice thereof to the indemnifying party so long as
the Indemnified Party irrevocably agrees to refund such moneys, with interest,
if it is ultimately determined by a court of competent jurisdiction that such
party was not entitled to indemnification. The indemnity agreements contained
herein shall be in addition to (a) any cause of action or similar rights of the
Indemnified Party against the indemnifying party or others, and (b) any
liabilities to which the indemnifying party may be subject.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Fees and Expenses. Each of the parties to this Agreement
-----------------
shall pay its own fees and expenses related to the transactions contemplated by
this Agreement; except that, the Company shall pay, at the Initial Closing, a
non-accountable expense allowance of $35,000 for the Purchaser's legal,
administrative and due diligence costs and expenses and any other additional
fees as set forth in the Escrow Agreement. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 8.2. Specific Enforcement. The Company and the Purchaser
--------------------
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
23
Section 8.3. Entire Agreement; Amendment. The Transaction Documents
---------------------------
contain the entire understanding of the parties with respect to the matters
covered in the Transaction Documents. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought and no condition to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.
Section 8.4. Notices. Any notice, demand, request, waiver or other
-------
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: 000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxx Xxxx Xxxx and Freidenrich, LLP
(which shall not constitute 000 Xxxxxxxx Xxxxxx
xxxxxx) Xxxx Xxxx, XX 00000
Attn: Xxxxx Xxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser: c/o Beacon Capital Management
Harbour House, 2/nd/ Floor
Waterfront Drive
Road Town, Tortola
British Virgin Islands
Attn: Xxxxx Xxxx
Fax: (000) 000-0000
with copies to: Xxxxxxx Xxxxxx & Green P.C.
(which shall not constitute 000 Xxxx Xxxxxx
xxxxxx) Xxx Xxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
24
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto in
accordance herewith.
Section 8.5. Waivers. No waiver by either party of any default with
-------
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 8.6. Headings. The article, section and subsection headings
--------
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 8.7. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their successors and assigns.
The parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment.
Section 8.8. No Third Party Beneficiaries. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.9. Governing Law/Arbitration. This Agreement shall be
-------------------------
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to the choice of law provisions. The Company and
the Purchaser agree to submit themselves to the in personam jurisdiction of the
state and federal courts situated within the Southern District of the State of
New York with regard to any controversy arising out of or relating to this
Agreement. Any dispute under this Agreement or any Exhibit attached hereto shall
be submitted to arbitration under the American Arbitration Association (the
"AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to participate
in the arbitration proceeding within thirty days of any deadline for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the parties to the dispute, and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The prevailing party shall be
25
awarded its costs, including attorneys' fees, from the non-prevailing party as
part of the arbitration award. Any party shall have the right to seek injunctive
relief from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including reasonable attorneys' fees, from the non-prevailing party.
Section 8.10. Counterparts. This Agreement may be executed in any
------------
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. Execution may be made by
delivery by facsimile.
Section 8.11. Publicity. Neither the Company nor the Purchaser shall
---------
issue any press release or otherwise make any public statement or announcement
with respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement, without the prior written consent of the other
party. After the Initial Closing, the Company may issue a press release or
otherwise make a public statement or announcement with respect to this Agreement
or the transactions contemplated hereby or the existence of this Agreement;
provided, however, that prior to issuing any such press release, making any such
-------- -------
public statement or announcement, the Company obtains the prior consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed.
Section 8.12. Severability. The provisions of this Agreement are
------------
severable and, in the event that The Board of Arbitration or any court or
officials of any regulatory agency of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible, so long as such construction does not materially
adversely affect the economic rights of either party hereto.
Section 8.13. Further Assurances. From and after the date of this
------------------
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
Section 8.14. Effectiveness of Agreement. This Agreement shall
--------------------------
become effective only upon satisfaction of the conditions precedent to the
Initial Closing set forth in Article I of the Escrow Agreement.
26
ARTICLE 9
DEFINITIONS
Section 9.1. Certain Definitions.
(a) "Commencement Date" shall have the meaning assigned to
-----------------
such term in Section 5.1(f) hereof.
(b) "Commitment Amount" shall have the meaning assigned to
-----------------
such term in Section 1.1 hereof.
(c) "Commitment Period" shall mean the period commencing on
-----------------
the Effective Date and expiring on the earliest to occur of (i) the date on
which the Purchaser shall have exercised an aggregate amount of Draw Downs
equal to the Commitment Amount, (ii) the date this Agreement is terminated
in accordance with the terms hereof, or (iii) the date occurring thirty-six
(36) months from the Effective Date.
(d) "Common Stock" shall mean the Company's common stock,
------------
$0.001 par value per share.
(e) "Disclosure Schedule" shall mean the schedules prepared
-------------------
by the Company and attached hereto.
(f) "Draw Down" shall have the meaning assigned to such term
---------
in Section 5.1(a) hereof.
(g) "Draw Down Notice" shall have the meaning assigned to
----------------
such term in Section 5.1(f) hereof.
(h) "Draw Down Pricing Period" shall mean a period of twenty
------------------------
(20) consecutive Trading Days beginning on the date specified in the Draw
Down Notice (as defined in Section 5.1(f) herein); provided, however, the
-------- -------
Draw Down Pricing Period shall not begin before the day on which receipt of
such notice is confirmed by the Purchaser.
(i) "DTC" shall have the meaning assigned to such term in
---
Section 5.1(g).
(j) "DWAC" shall have the meaning assigned to such term in
----
Section 5.1(g).
(k) "Effective Date" shall mean the date the Registration
--------------
Statement of the Company covering the Shares being subscribed for hereby is
declared effective by the SEC.
(l) "Exchange Act" shall mean the Securities Exchange Act of
------------
1934, as amended, and the rules and regulations promulgated thereunder.
27
(m) "GAAP" shall mean the United States Generally Accepted
----
Accounting Principles as those conventions, rules and procedures are
determined by the Financial Accounting Standards Board and its predecessor
agencies.
(n) "Initial Closing" shall have the meaning assigned to
---------------
such term in Section 1.2 hereof.
(o) "Initial Closing Date" shall have the meaning assigned
--------------------
to such term in Section 1.2 hereof.
(p) "Investment Amount" shall have the meaning assigned to
-----------------
such term in Section 5.1(f) hereof.
(q) "Material Adverse Effect" shall mean any adverse effect
-----------------------
on the business, operations, properties, prospects or financial condition
of the Company that is material and adverse to the Company and its
subsidiaries and affiliates, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to perform any of its material
obligations under this Agreement or the Registration Rights Agreement or to
perform its obligations under any other Material Agreement (as defined in
Section 2.1(s)).
(r) "Principal Market" shall mean initially the Nasdaq
----------------
National market and shall include the American Stock Exchange, the Nasdaq
Small-Cap Market and the New York Stock Exchange if the Company becomes
listed and trades on such market or exchange after the date hereof.
(s) "Purchase Price" shall mean, with respect to Shares
--------------
purchased during each applicable Settlement Period, 95.5% of the VWAP on
the date in question.
(t) "Registration Statement" shall mean the registration
----------------------
statement under the Securities Act, to be filed with the Securities and
Exchange Commission for the registration of the Shares pursuant to the
Registration Rights Agreement attached hereto as Exhibit A (the
---------
"Registration Rights Agreement).
(u) "SEC" shall mean the Securities and Exchange Commission.
---
(v) "SEC Documents" shall mean the Company's latest Form 10-
-------------
K or Form 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and
8-K filed thereafter, and the Proxy Statement for its latest fiscal year as
of the time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
(w) "Securities Act" shall mean the Securities Act of 1933,
--------------
as amended, and the rules and regulations promulgated thereunder.
28
(x) "Settlement" shall mean the delivery of the Draw Down
----------
Shares into the Purchaser's DTC account via DTC's DWAC System in exchange
for payment therefor.
(y) "Settlement Date" shall have the meaning assigned to
---------------
such term in Section 5.1(b).
(z) "Settlement Period" shall have the meaning assigned to
-----------------
such term in Section 5.1(b).
(aa) "Shares" shall mean, collectively, the shares of Common
------
Stock of the Company being subscribed for hereunder (the "Draw Down
Shares") and the shares of Common Stock issuable upon exercise of the
Warrant (the "Warrant Shares").
(bb) "Threshold Price" shall mean the price per Share
---------------
designated by the Company as the lowest VWAP during any Draw Down Pricing
Period at which the Company shall sell its Common Stock in accordance with
this Agreement.
(cc) "Trading Day" shall mean any day on which the Principal
-----------
Market is open for business.
(dd) "Transaction Documents" shall mean this Agreement, the
---------------------
Registration Rights Agreement and the Escrow Agreement.
(ee) "VWAP" shall mean the daily volume weighted average
----
price of the Company's Common Stock on the Principal Market as reported by
Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern
Time to 4:02 p.m. Eastern Time) using the VAP function on the date in
question.
(ff) "Warrant" shall mean the warrant issued to the Purchaser
-------
pursuant to Section 4.2(f) hereof.
[SIGNATURE PAGE FOLLOWS]
29
[SIGNATURE PAGE TO EQUITY LINE PURCHASE AGREEMENT]
--------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officer as of this 15th day of
June, 2001.
VALICERT, INC.,
By: /s/ Xxxxxx Xxxxx
__________________________________
Xxxxxx Xxxxx, President & CEO
RELLIAN INVESTMENTS LIMITED
By: /s/ Xxxxx Xxxx
_________________________________
Xxxxx Xxxx, Director
30
DRAW DOWN NOTICE/COMPLIANCE CERTIFICATE
Valicert, Inc.
The undersigned hereby certifies, with respect to shares of Common
Stock of Valicert, Inc. (the "Company") issuable in connection with this Draw
Down Notice and Compliance Certificate dated _____________ (the "Notice"),
delivered pursuant to the Common Stock Purchase Agreement dated as of June __,
2001 (the "Agreement"), as follows:
1. The undersigned is the duly appointed Chief Executive Officer or
Chief Financial Officer of the Company.
2. Except as set forth on the schedules attached hereto, the
representations and warranties of the Company set forth in the Agreement are
true and correct in all material respects as though made on and as of the date
hereof and all SEC Documents are as represented in Section 2.1(f) of the
Agreement.
3. The Company has performed in all material respects all covenants
and agreements to be performed by the Company under the Agreement on or prior to
the date of this Draw Down Notice and has complied in all material respects with
all of the Company's obligations and conditions contained in the Agreement.
4. The Investment Amount is $___________.
5. The Threshold Price, if any, is $__________.
6. The Draw Down Pricing Period shall commence on ____________.
The undersigned has executed this Certificate this ____ day of
________, _____.
VALICERT, INC.
By:___________________________
Name:
Title:
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE LAWS.
STOCK PURCHASE WARRANT
To Purchase 100,000 Shares of Common Stock of
VALICERT, INC.
THIS CERTIFIES that, for value received, Rellian Investments Limited (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 June
15, 2001 (the "Initial Exercise Date") and on or prior to the close of business
on June 15, 2004 (the "Termination Date") but not thereafter, to subscribe for
and purchase from Valicert, Inc., a corporation incorporated in the State of
Delaware (the "Company"), up to 100,000 shares (the "Warrant Shares") of Common
Stock, $0.001 par value per share, of the Company (the "Common Stock"). In
accordance with Section 4.2(f) of that certain Purchase Agreement (hereinafter
defined), the purchase price of one share of Common Stock (the "Exercise Price")
under this Warrant shall be $2.9163. The Exercise Price and the number of
Warrant Shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. In the event of any conflict between the terms
of this Warrant and the Common Stock Purchase Agreement dated as of June 15,
2001 pursuant to which this Warrant has been issued (the "Purchase Agreement"),
the Purchase Agreement shall control. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.
1
1. Title to Warrant. Prior to the Termination Date and subject to
----------------
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, subject to Section 7 herein, 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 Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all Warrant
-----------------------
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant and payment in accordance with Section 3 hereof, 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).
3. Exercise of Warrant.
-------------------
(a) Except as provided in Section 4 herein, exercise of the
purchase rights represented by this Warrant may be made at any time or
times on or after the Initial Exercise Date and on or before the close of
business on the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the
Company (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 upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or cashier's check
drawn on a United States bank, or by means of a cashless exercise, the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder within three (3) Trading Days after the date on
which this Warrant shall have been exercised as aforesaid. This Warrant
shall be deemed to have been exercised and such certificate or certificates
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 shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 5 prior to
the issuance of such shares, have been paid.
(b) If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
(c) This Warrant shall also be exercisable by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of
Common Stock on the Trading Day preceding the date of such
election on the Nasdaq Stock Market, or if the Common Stock is
not traded on the Nasdaq Stock Market, then the Principal Market
in terms of volume;
(B) = the Exercise Price of this Warrant; and
(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant and the
Notice of Exercise.
(d) Notwithstanding anything herein to the contrary, in no event
shall the Holder be permitted to exercise this Warrant for Warrant Shares
to the extent that (i) the number of shares of Common Stock owned by such
Holder (other than Warrant Shares issuable upon exercise of this Warrant)
plus (ii) the number of Warrant Shares issuable upon exercise of this
Warrant, would be equal to or exceed 9.9% of the number of shares of Common
Stock then issued and outstanding, including shares issuable upon exercise
of this Warrant held by such Holder after application of this Section 3(d).
As used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 3(d) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of such Holder, and the submission of a Notice of
Exercise shall be deemed to be such Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned by such
Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination.
Nothing contained herein shall be deemed to restrict the right of a Holder
to exercise this Warrant into Warrant Shares at such time as such exercise
will not violate the provisions of this Section 3(d). The provisions of
this Section 3(d) may be waived by the Holder upon, at the election of the
Holder, with not less than 61 days' prior notice to the Company, and the
provisions of this Section 3(d) shall continue to apply until such 61/st/
day (or such later date as may be specified in such notice of waiver). No
exercise of this Warrant in violation of this Section 3(d) but otherwise in
accordance with this Warrant shall affect the status of the Warrant Shares
as validly issued, fully-paid and nonassessable.
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for
---------------------------
Warrant Shares 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 Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant 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.
6. Closing of Books. The Company will not close its stockholder
----------------
books or records in any manner which prevents the timely exercise of this
Warrant.
7. Transfer, Division and Combination.
----------------------------------
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant 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. In the event that the Holder wishes to transfer a
portion of this Warrant, the Holder shall transfer at least 25,000 shares
underlying this Warrant to any such transferee so long as transferee is an
Affiliate (as defined herein) of Purchaser. For purposes of this
Agreement, the term "Affiliate of a subject entity shall mean an entity
that controls, is controlled by or is under common control with the subject
entity. For purposes of the definition of "Affiliate," "control" shall
mean beneficial ownership (whether direct or indirect) of shares of an
entity entitled to vote in the election of directors (or, in the case of an
entity that is not a corporation, of the election of the corresponding
management authority) of such and entity of (i) more than fifty percent
(50%) or (ii) such lesser percentage as is the maximum ownership permitted
in the country where the entity exists. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant
or Warrants 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 Warrant evidencing the portion of
this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A Warrant, if properly assigned, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 7.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the
Warrants.
8. No Rights as Shareholder until Exercise. This Warrant 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 Warrant and
the payment of the aggregate Exercise Price or by means of a cashless exercise,
the Warrant Shares 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.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
-------------------------------------------------
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. 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.
11. Adjustments of Exercise Price and Number of Warrant Shares. (a)
----------------------------------------------------------
Stock Splits, etc. The number and kind of securities purchasable upon the
------------------
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
12. Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
---------------------
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property 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 this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time
-----------------------------------
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
--------------------
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the Holder notice of such adjustment or adjustments setting forth the number
of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Notice of Corporate Action. If at any time:
--------------------------
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any evidences
of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to
Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period
-----------------
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
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 Warrant, 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 against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
above the amount payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) 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 Warrant.
Before taking any action which would result in an adjustment in
the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise 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.
17. Miscellaneous.
-------------
(a) Jurisdiction. This Warrant shall constitute a contract under
------------
the laws of Delaware, without regard to its conflict of law, principles or
rules, and be subject to arbitration pursuant to the terms set forth in the
Purchase Agreement.
(b) Restrictions. The Holder acknowledges that the Warrant
------------
Shares acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities laws.
(c) 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 Holder's rights, powers or
remedies, notwithstanding all
rights hereunder terminate on the Termination Date. If the Company
willfully and knowingly fails to comply with any provision of this Warrant,
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.
(d) 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.
(e) Limitation of Liability. No provision hereof, in the absence
-----------------------
of affirmative action by Holder to purchase Warrant Shares, 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.
(f) 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 Warrant. 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 Warrant
and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities
----------------------
laws, this Warrant 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
Warrant are intended to be for the benefit of all Holders from time to time
of this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the
---------
provisions hereof waived with the written consent of the Company and the
Holder.
(i) Severability. Wherever possible, each provision of this
------------
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant 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 Warrant.
(j) Headings. The headings used in this Warrant are for the
--------
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: June 15, 2001
VALICERT, INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Xxxxxx Xxxxx, President & CEO
NOTICE OF EXERCISE
To: Valicert, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant
Shares (the "Common Stock"), of Valicert, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
_______________________________
The Warrant Shares shall be delivered to the following:
_______________________________
_______________________________
_______________________________
Rellian Investments Limited
By: ______________________________
Name:
Title:
Dated: ________________________
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO CASHLESS EXERCISE PROVISIONS
To: Valicert, Inc.
Aggregate Price of Warrant Before Exercise: $________
Aggregate Price Being Exercised: $________
Exercise Price: $_______ per share
Number of Shares of Common Stock to be Issued Under this Notice: ________
Remaining Aggregate Price (if any) After Issuance: $________
Gentlemen:
The undersigned, registered Holder of the Warrant delivered herewith,
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of Valicert, Inc., a Delaware corporation, as provided
below. Capitalized terms used herein, unless otherwise defined herein, shall
have the meanings given in the Warrant. The portion of the Exercise Price (as
defined in the Warrant) to be applied toward the purchase of Common Stock
pursuant to this Notice of Exercise is $_______, thereby leaving a remaining
Exercise Price (if any) equal to $________. Such exercise shall be pursuant to
the cashless exercise provisions of Section 3 of the Warrant; therefore, Holder
makes no payment with this Notice of Exercise. The number of shares to be
issued pursuant to this exercise shall be determined by reference to the formula
in Section 3 of the Warrant which, by reference to Section 3, requires the use
of the high and low trading price of the Company's Common Stock on the Trading
Day preceding the date of such election. The high and low trading price of the
Company's Common Stock has been determined by Holder to be $______ and
$_________, respectively, which figure is acceptable to Holder for calculations
of the number of shares of Common Stock issuable pursuant to this Notice of
Exercise. Holder requests that the certificates for the purchased shares of
Common Stock be issued in the name of _________________________ and delivered to
______________________________________________. To the extent the foregoing
exercise is for less than the full Aggregate Price of the Warrant, a replacement
Warrant representing the remainder of the Aggregate Price (and otherwise of like
form, tenor and effect) shall be delivered
to Holder along with the share certificate evidencing the Common Stock issued in
response to this Notice of Exercise.
Rellian Investments Limited
By:___________________________________
Name:
Title:
Date:
NOTE
The execution to the foregoing Notice of Exercise must exactly
correspond to the name of the Holder on the Warrant.
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 Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
__________________________________________________________________.
__________________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, 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 an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE LAWS.
STOCK PURCHASE WARRANT
To Purchase 100,000 Shares of Common Stock of
VALICERT, INC.
THIS CERTIFIES that, for value received, Pacific Crest Securities,
Inc. (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
June 15, 2001 (the "Initial Exercise Date") and on or prior to the close of
business on June 15, 2004 (the "Termination Date") but not thereafter, to
subscribe for and purchase from Valicert, Inc., a corporation incorporated in
the State of Delaware (the "Company"), up to 100,000 shares (the "Warrant
Shares") of Common Stock, $0.001 par value per share, of the Company (the
"Common Stock"). The purchase price of one share of Common Stock (the "Exercise
Price") under this Warrant shall be $2.9163. The Exercise Price and the number
of Warrant Shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. In the event of any conflict between the terms
of this Warrant and the Common Stock Purchase Agreement dated as of June 15,
2001 pursuant to which this Warrant has been issued (the "Purchase Agreement"),
the Purchase Agreement shall control. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.
1
1. Title to Warrant. Prior to the Termination Date and subject to
----------------
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, subject to Section 7 herein, 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 Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all Warrant
-----------------------
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant and payment in accordance with Section 3 hereof, 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).
3. Exercise of Warrant.
-------------------
(a) Except as provided in Section 4 herein, exercise of the
purchase rights represented by this Warrant may be made at any time or
times on or after the Initial Exercise Date and on or before the close of
business on the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the
Company (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 upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or cashier's check
drawn on a United States bank, or by means of a cashless exercise, the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder within three (3) Trading Days after the date on
which this Warrant shall have been exercised as aforesaid. This Warrant
shall be deemed to have been exercised and such certificate or certificates
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 shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 5 prior to
the issuance of such shares, have been paid.
(b) If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
(c) This Warrant shall also be exercisable by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:
2
(A) = the average of the high and low trading prices per share of
Common Stock on the Trading Day preceding the date of such
election on the Nasdaq Stock Market, or if the Common Stock is
not traded on the Nasdaq Stock Market, then the Principal Market
in terms of volume;
(B) = the Exercise Price of this Warrant; and
(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant and the
Notice of Exercise.
(d) Notwithstanding anything herein to the contrary, in no event
shall the Holder be permitted to exercise this Warrant for Warrant Shares
to the extent that (i) the number of shares of Common Stock owned by such
Holder (other than Warrant Shares issuable upon exercise of this Warrant)
plus (ii) the number of Warrant Shares issuable upon exercise of this
Warrant, would be equal to or exceed 9.9% of the number of shares of Common
Stock then issued and outstanding, including shares issuable upon exercise
of this Warrant held by such Holder after application of this Section 3(d).
As used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 3(d) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of such Holder, and the submission of a Notice of
Exercise shall be deemed to be such Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned by such
Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination.
Nothing contained herein shall be deemed to restrict the right of a Holder
to exercise this Warrant into Warrant Shares at such time as such exercise
will not violate the provisions of this Section 3(d). The provisions of
this Section 3(d) may be waived by the Holder upon, at the election of the
Holder, with not less than 61 days' prior notice to the Company, and the
provisions of this Section 3(d) shall continue to apply until such 61/st/
day (or such later date as may be specified in such notice of waiver). No
exercise of this Warrant in violation of this Section 3(d) but otherwise in
accordance with this Warrant shall affect the status of the Warrant Shares
as validly issued, fully-paid and nonassessable.
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for
---------------------------
Warrant Shares 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
3
name or names as may be directed by the Holder; provided, however, that in the
-------- -------
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant 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.
6. Closing of Books. The Company will not close its stockholder
----------------
books or records in any manner which prevents the timely exercise of this
Warrant.
7. Transfer, Division and Combination.
----------------------------------
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant 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. In the event that the Holder wishes to transfer a
portion of this Warrant, the Holder shall transfer at least 25,000 shares
underlying this Warrant to any such transferee so long as transferee is an
Affiliate (as defined herein) of Purchaser. For purposes of this
Agreement, the term "Affiliate of a subject entity shall mean an entity
that controls, is controlled by or is under common control with the subject
entity. For purposes of the definition of "Affiliate," "control" shall
mean beneficial ownership (whether direct or indirect) of shares of an
entity entitled to vote in the election of directors (or, in the case of an
entity that is not a corporation, of the election of the corresponding
management authority) of such and entity of (i) more than fifty percent
(50%) or (ii) such lesser percentage as is the maximum ownership permitted
in the country where the entity exists. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant
or Warrants 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 Warrant evidencing the portion of
this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A Warrant, if properly assigned, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 7.
4
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the
Warrants.
8. No Rights as Shareholder until Exercise. This Warrant 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 Warrant and
the payment of the aggregate Exercise Price or by means of a cashless exercise,
the Warrant Shares 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.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
-------------------------------------------------
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. 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.
11. Adjustments of Exercise Price and Number of Warrant Shares. (a)
----------------------------------------------------------
Stock Splits, etc. The number and kind of securities purchasable upon the
------------------
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
5
12. Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
---------------------
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property 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 this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
6
13. Voluntary Adjustment by the Company. The Company may at any time
-----------------------------------
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
--------------------
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the Holder notice of such adjustment or adjustments setting forth the number
of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Notice of Corporate Action. If at any time:
--------------------------
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any evidences
of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of
7
Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period
-----------------
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
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 Warrant, 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 against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
above the amount payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) 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 Warrant.
Before taking any action which would result in an adjustment in
the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise 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.
17. Miscellaneous.
-------------
(a) Jurisdiction. This Warrant shall constitute a contract under
------------
the laws of Delaware, without regard to its conflict of law, principles or
rules, and be subject to arbitration pursuant to the terms set forth in the
Purchase Agreement.
(b) Restrictions. The Holder acknowledges that the Warrant
------------
Shares acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities laws.
(c) 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 Holder's rights, powers or
remedies, notwithstanding all
8
rights hereunder terminate on the Termination Date. If the Company
willfully and knowingly fails to comply with any provision of this Warrant,
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.
(d) 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.
(e) Limitation of Liability. No provision hereof, in the absence
-----------------------
of affirmative action by Holder to purchase Warrant Shares, 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.
(f) 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 Warrant. 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 Warrant
and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities
----------------------
laws, this Warrant 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
Warrant are intended to be for the benefit of all Holders from time to time
of this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the
---------
provisions hereof waived with the written consent of the Company and the
Holder.
(i) Severability. Wherever possible, each provision of this
------------
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant 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 Warrant.
(j) Headings. The headings used in this Warrant are for the
--------
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
9
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: June 15, 2001
VALICERT, INC.
By: /s/ Xxxxxx Xxxxx
--------------------------------------
Xxxxxx Xxxxx, President & CEO
10
NOTICE OF EXERCISE
To: Valicert, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares
(the "Common Stock"), of Valicert, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
_______________________________
The Warrant Shares shall be delivered to the following:
_______________________________
_______________________________
_______________________________
Pacific Crest Securities, Inc.
By:______________________________
Name:
Title:
Dated: __________________________
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO CASHLESS EXERCISE PROVISIONS
To: Valicert, Inc.
Aggregate Price of Warrant Before Exercise: $______
Aggregate Price Being Exercised: $______
Exercise Price: $______ per share
Number of Shares of Common Stock to be Issued Under this Notice: ________
Remaining Aggregate Price (if any) After Issuance: $_______
Gentlemen:
The undersigned, registered Holder of the Warrant delivered herewith,
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of Valicert, Inc., a Delaware corporation, as provided
below. Capitalized terms used herein, unless otherwise defined herein, shall
have the meanings given in the Warrant. The portion of the Exercise Price (as
defined in the Warrant) to be applied toward the purchase of Common Stock
pursuant to this Notice of Exercise is $_______, thereby leaving a remaining
Exercise Price (if any) equal to $________. Such exercise shall be pursuant to
the cashless exercise provisions of Section 3 of the Warrant; therefore, Holder
makes no payment with this Notice of Exercise. The number of shares to be
issued pursuant to this exercise shall be determined by reference to the formula
in Section 3 of the Warrant which, by reference to Section 3, requires the use
of the high and low trading price of the Company's Common Stock on the Trading
Day preceding the date of such election. The high and low trading price of the
Company's Common Stock has been determined by Holder to be $______ and
$_________, respectively, which figure is acceptable to Holder for calculations
of the number of shares of Common Stock issuable pursuant to this Notice of
Exercise. Holder requests that the certificates for the purchased shares of
Common Stock be issued in the name of _________________________ and delivered to
______________________________________________. To the extent the foregoing
exercise is for less than the full Aggregate Price of the Warrant, a replacement
Warrant representing the remainder of the Aggregate Price (and otherwise of like
form, tenor and effect) shall be delivered
2
to Holder along with the share certificate evidencing the Common Stock issued in
response to this Notice of Exercise.
Pacific Crest Securities, Inc.
By:_______________________________
Name:
Title:
Date:
NOTE
The execution to the foregoing Notice of Exercise must exactly
correspond to the name of the Holder on the Warrant.
3
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 Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, 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 an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
