EXHIBIT 4.2
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NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase ________ Shares of Common Stock of
XXXXXX.XXX, INC.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies
that, for value received, _____________ (the "Holder"), is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the date hereof (the "Initial Exercise Date")
and on or prior to the close of business on the _____(1) (the "Termination
Date") but not thereafter, to subscribe for and purchase from XXXXxx.xxx, Inc.,
a Delaware corporation (the "Company"), up to ______ shares (the "Warrant
Shares") of Common Stock, par value $.0001 per share, of the Company (the
"Common Stock"). The purchase price of one share of Common Stock under this
Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
SECTION 1. DEFINITIONS. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated June 30, 2006, among the
Company and the purchasers signatory thereto.
SECTION 2. EXERCISE.
a) Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before
the Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice in
writing to the
_____________________
(1) December 28, 2010 as to Long Term Warrants and the earlier of December 28,
2010 or the 12 month anniversary of the Effective Date as to Short Term
Warrants.
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registered Holder at the address of such Xxxxxx appearing on the books
of the Company); provided, however, within 5 Trading Days of the date
said Notice of Exercise is delivered to the Company, if this Warrant is
exercised in full, the Holder shall have surrendered this Warrant to
the Company and the Company shall have received payment of the
aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States bank.
Notwithstanding anything herein to the contrary, the Holder shall not
be required to physically surrender this Warrant to the Company until
the Holder has purchased all of the Warrant Shares available hereunder
and the Warrant has been exercised in full. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of
Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. The
Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company
shall deliver any objection to any Notice of Exercise Form within 1
Business Day of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any
assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than the
amount stated on the face hereof.
b) Exercise Price. The exercise price of the Common Stock
under this Warrant shall be $_____(2), subject to adjustment hereunder
(the "Exercise Price").
c) Cashless Exercise. If at any time after one year from the
date of issuance of this Warrant there is no effective Registration
Statement registering, or no current prospectus available for, the
resale of the Warrant Shares by the Holder, then this Warrant may also
be exercised at such time 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 VWAP on the Trading Day immediately preceding the
date of such election;
(B)= the Exercise Price of this Warrant, as adjusted; and
(X)= the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding anything herein to the contrary, on the
Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 2(c).
___________________
(2) $0.85 as to Short Term Warrants and $1.00 as to Long Term Warrants.
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d) Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2(c) or
otherwise, to the extent that after giving effect to such issuance
after exercise, such Holder (together with such Holder's affiliates,
and any other person or entity acting as a group together with such
Holder or any of such Holder's affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially
owned by such Holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be
issuable upon (A) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by such Holder or any of its affiliates
and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without
limitation, any other Debentures or Warrants) subject to a limitation
on conversion or exercise analogous to the limitation contained herein
beneficially owned by such Holder or any of its affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by a Holder that the Company is not
representing to such Holder that such calculation is in compliance with
Section 13(d) of the Exchange Act and such Holder is solely responsible
for any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder) and of which a portion of this
Warrant is exercisable shall be in the sole discretion of a Holder, and
the submission of a Notice of Exercise shall be deemed to be each
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. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder. For purposes of this
Section 2(d), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company's most recent Form 10-QSB or Form
10-KSB, as the case may be, (y) a more recent public announcement by
the Company or (z) any other notice by the Company or the Company's
Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by such Holder or
its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The "Beneficial Ownership
Limitation" shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon
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exercise of this Warrant. The Beneficial Ownership Limitation
provisions of this Section 2(d) may be waived by such Holder, at the
election of such Holder, upon not less than 61 days' prior notice to
the Company to change the Beneficial Ownership Limitation to 9.99% of
the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon exercise
of this Warrant, and the provisions of this Section 2(d) shall continue
to apply. Upon such a change by a Holder of the Beneficial Ownership
Limitation from such 4.99% limitation to such 9.99% limitation, the
Beneficial Ownership Limitation may not be waived by such Holder. The
provisions of this paragraph shall be implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(d) to
correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations
contained in this paragraph shall apply to a successor holder of this
Warrant.
e) Mechanics of Exercise.
i. Authorization of Warrant 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, 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).
ii. Delivery of Certificates Upon Exercise. Certificates for
shares purchased hereunder shall be transmitted by the transfer agent
of the Company to the Holder by crediting the account of the Holder's
prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission ("DWAC") system if the Company is a
participant in such system, and otherwise by physical delivery to the
address specified by the Holder in the Notice of Exercise within 3
Trading Days from the delivery to the Company of the Notice of Exercise
Form, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above ("Warrant Share Delivery
Date"). This Warrant shall be deemed to have been exercised on the date
the Exercise Price is received by the Company. The Warrant Shares 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 2(e)(vii) prior to the issuance of such shares, have been paid.
iii. Delivery of New Warrants Upon Exercise. If this Warrant
shall have been exercised in part, the Company shall, at the request of
a Holder and upon surrender of this Warrant certificate, at the time of
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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.
iv. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)(iv) by
the Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.
v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise. In addition to any other rights available
to the Holder, if the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to an exercise on or before the Warrant Share
Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Holder of
the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (1) pay in cash to the
Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A)
the number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder.
For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
attempted exercise of shares of Common Stock with an aggregate sale
price giving rise to such purchase obligation of $10,000, under clause
(1) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the
Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a
Holder's right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant as required pursuant to the terms
hereof.
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vi. 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.
vii. 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.
viii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
f) Redemption at Election of Xxxxxx. If the Company shall
agree to sell substantially all of its assets in one or more
transactions in which the consideration consists solely of cash, cash
equivalents, assumption of indebtedness, or any combination thereof,
the Holder shall have the right to require the Company, by written
notice to the Company, to redeem this Warrant, in full and in cash, at
the closing of such sale of assets. The aggregate amount payable in
full redemption of the Warrants required to be redeemed upon such sale
of assets shall be equal to the Warrant Cash Sale Redemption Amount (as
defined below). In the event that the Company fails to pay the Warrant
Cash Sale Redemption Amount within three business days of the closing
of the sale transaction, interest shall accrue on the unpaid Warrant
Cash Redemption Amount at the rate of 18% per annum, or such lower
maximum amount of interest permitted to be charged under applicable
law, until the Warrant Cash Sale Redemption Amount is paid in full.
Concurrently with the payment in full of the Warrant Cash Sale
Redemption Amount, the Holder shall surrender this Warrant to or as
directed by the Company (or the successor company). The Holder may
elect to exercise this Warrant pursuant to Sections 2(a) or 2(c) hereof
prior to actual payment in cash for the redemption.
g) Definitions Applicable to Section 2(f). For the purposes of
Section 2(f):
i. "Warrant Cash Sale Redemption Amount" shall equal
the sum of (i) all unexercised Warrant Shares underlying this
Warrant if the Warrants were issued pursuant to a cashless
exercise exercised on the date the redemption right hereunder
is exercised based on the Effective Price (as defined below)
and (ii) all
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other amounts, costs, expenses and liquidated damages due in
respect of this Debenture The "Effective Price" shall be the
cash consideration paid by the acquirer in such event (less
the amount paid in redemption of the Debentures in clause (i)
of the definition of Cash Sale Redemption Amount set forth
therein) divided by the sum of; (x) the issued and outstanding
shares of Common Stock of the Company then outstanding and (y)
the shares of Common Stock into which the outstanding
Debentures may be converted on the day immediately preceding
the record date fixed for determining the holders of shares of
Common Stock eligible to receive a distribution (or if no such
date has been fixed, the date of the day immediately preceding
the closing of the transaction) and (z) the number of shares
deemed issuable to the Warrant holders pursuant to the
mandatory redemption provisions in this and the other Warrants
which take effect upon sale of assets for cash consideration
whether or not any Warrant holder shall have elected to have
their Warrants Redeemed; provided, however, that the number of
shares of Common Stock issuable on conversion of the
Debentures and issuable upon exercise of the Warrants for this
purpose shall be determined on a fully converted or exercised
basis and ignoring any conversion or exercise limitations
therein.
SECTION 3. CERTAIN ADJUSTMENTS.
a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to
this Warrant), (B) subdivides outstanding shares of Common Stock into a
larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number
of shares, or (D) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares
issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales.
i. If the Company or any Subsidiary thereof, as applicable, at
any time while this Warrant is outstanding, shall (except for an Exempt
Issuance) offer, sell, grant any option to purchase or offer, sell or
grant any right to reprice its securities, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or
other disposition) any Common Stock or Common
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Stock Equivalents entitling any Person to acquire shares of Common
Stock, at an effective price per share less than the then Exercise
Price (such lower price, the "Base Share Price" and such issuances
collectively, a "Dilutive Issuance"), as adjusted hereunder (if the
holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share which is less than the
Exercise Price, such issuance shall be deemed to have occurred for less
than the Exercise Price on such date of the Dilutive Issuance), then
the Exercise Price shall be reduced and only reduced to equal the Base
Share Price and the number of Warrant Shares issuable hereunder shall
be increased such that the aggregate Exercise Price payable hereunder,
after taking into account the decrease in the Exercise Price, shall be
equal to the aggregate Exercise Price prior to such adjustment.
ii. If the Company or any Subsidiary there, as applicable, at
any time while this Warrant is outstanding, shall offer, sell, grant
any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common
Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the
VWAP on either the Trading Day immediately prior to the date agreements
for such issuance are entered into or the date such issuance is
consummated, whichever results in a higher VWAP, but more than the then
effective Exercise Price (which is addressed in 3(b)(i) above) (such
lower price, the "Market Base Price" and such issuances collectively, a
"Market Dilutive Issuance"), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any
time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share which is less than the
Exercise Price, such issuance shall be deemed to have occurred for less
than the Exercise Price on such date of the Market Dilutive Issuance)
then the Exercise Price shall be reduced to a price determined by
multiplying the then effective Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock issued and
outstanding immediately prior to the Market Dilutive Issuance plus the
number of shares of Common Stock which the aggregate offering price for
such Market Dilutive Issuance would purchase at the then Market Base
Price, and the denominator of which shall be the sum of the number of
shares of Common Stock issued and outstanding immediately prior to the
Market Dilutive Issuance plus the number of shares of Common Stock so
issued or issuable in connection with the Market Dilutive Issuance and
the number of Warrant Shares issuable hereunder shall be increased such
that the aggregate Exercise Price payable hereunder, after taking into
account the decrease in the Exercise Price, shall be equal to the
aggregate Exercise Price prior to such adjustment.
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iii. Such adjustments shall be made whenever such Common Stock
or Common Stock Equivalents are issued. Notwithstanding the foregoing,
no adjustments shall be made, paid or issued under this Section 3(b) in
respect of an Exempt Issuance. The Company shall notify the Holder in
writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalents subject to this section,
indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms
(such notice the "Dilutive Issuance Notice"). For purposes of
clarification, whether or not the Company provides a Dilutive Issuance
Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance or Market Dilutive Issuance, as applicable, after the
date of such Dilutive Issuance or Market Dilutive Issuance, as
applicable, the Holder is entitled to receive a number of Warrant
Shares based upon the Base Share Price or the price determined pursuant
to 3(b)(ii), as applicable, regardless of whether the Holder accurately
refers to the Base Share Price or such price determined pursuant to
3(b)(ii) in the Notice of Exercise.
c) Pro Rata Distributions. If the Company, at any time prior
to the Termination Date, shall distribute to all holders of Common
Stock (and not to Holders of the Warrants) evidences of its
indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security other than the
Common Stock (which shall be subject to Section 3(b)), then in each
such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of
the record date mentioned above, and of which the numerator shall be
such VWAP on such record date less the then per share fair market value
at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the
Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided
to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
d) Fundamental Transaction. If, at any time while this Warrant
is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any
sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in
any such case, a "Fundamental Transaction"), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been
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issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder, (a) 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 any additional consideration (the "Alternate
Consideration") receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a
Holder of the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to such event or (b) if the Company is
acquired in an all cash transaction, cash equal to the value of this
Warrant as determined in accordance with the Black-Scholes option
pricing formula. For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the
Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the
Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder's right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of
this Section 3(d) and insuring that this Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
e) Calculations. All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
f) Voluntary Adjustment By 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.
g) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the Exercise Price
is adjusted pursuant to this Section 3, the Company shall promptly mail
to each Holder a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company
shall be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest
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possible conversion or exercise price at which such securities may be
converted or exercised in the case of a Variable Rate Transaction (as
defined in the Purchase Agreement).
ii. Notice to Allow Exercise by Xxxxxx. If (A) the Company
shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of
the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets
of the Company, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each
case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the
date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the 20-day period commencing
on the date of such notice to the effective date of the event
triggering such notice.
SECTION 4. TRANSFER OF WARRANT.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or in
part, 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. Upon such surrender
11
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) New Warrants. 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
4(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) Warrant Register. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time
to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the
transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under
applicable state securities or blue sky laws, the Company may require,
as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions)
to the effect that such transfer may be made without registration under
the Securities Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the
Company and (iii) that the transferee be an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a) under the Securities Act.
SECTION 5. MISCELLANEOUS.
a) Title to Warrant. Prior to the Termination Date and subject
to compliance with applicable laws and Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part,
at the office or agency of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with
the Assignment Form annexed hereto properly endorsed. The transferee
shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to
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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.
c) 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, in the case of the
Warrant, 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.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal
holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
e) Authorized Shares.
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 Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of
this 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 as set forth in this Warrant 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
13
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.
f) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
g) 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.
h) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's
rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of this 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.
i) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
j) Limitation of Liability. No provision hereof, in the
absence of any affirmative action by Holder to exercise this Warrant or
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.
k) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this 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.
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l) 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.
m) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holders of [60%] of the then outstanding Warrants.
n) 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.
o) 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.
********************
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: June __, 2006
XXXXXX.XXX, INC.
By: ____________________________
Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer
16
NOTICE OF EXERCISE
TO: XXXXXX.XXX, INC.
(1)______The undersigned hereby elects to purchase ________ Warrant
Shares of the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2)______Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares as is necessary,
in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant
Shares purchasable pursuant to the cashless exercise procedure set
forth in subsection 2(c).
(3)______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:
--------------------------
--------------------------
--------------------------
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF XXXXXX]
---------
Name of Investing Entity: _____________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: ________________________
Name of Authorized Signatory: _________________________________________________
Title of Authorized Signatory: ________________________________________________
Date: _________________________________________________________________________
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 a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
