EXHIBIT 10.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. SUBJECT TO COMPLIANCE
WITH THE REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY THIS WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT.
SERIES B. WARRANT TO PURCHASE COMMON STOCK
OF
RAPTOR NETWORKS TECHNOLOGY, INC.
ISSUE DATE: APRIL 1, 2004 WARRANT NO. B-__
THIS CERTIFIES that _______________________________ or any subsequent
holder hereof (the "HOLDER"), has the right to purchase from RAPTOR NETWORKS
TECHNOLOGY, INC., a Colorado corporation (the "COMPANY"), up to __________ fully
paid and nonassessable shares of the Company's common stock, par value $0.001
per share (the "COMMON STOCK"), subject to adjustment as provided herein, at a
price per share equal to the Exercise Price (as defined below), at any time and
from time to. time beginning on the date on which this Warrant is issued (the
"ISSUE DATE") and ending at 5:00 p.m., eastern time, on the fifth (5th)
anniversary of the Issue Date (the "EXPIRATION DATE"). This Warrant is issued
pursuant to a Securities Purchase Agreement, dated as of April 1, 2004 (the
"SECURITIES PURCHASE AGREEMENT"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Securities
Purchase Agreement.
1. EXERCISE.
(a) RIGHT TO EXERCISE; EXERCISE PRICE. The Holder shall have the right
to exercise this Warrant at any time and from time to time during the period
beginning on the Issue Date and ending on the Expiration Date as to all or any
part of the shares of Common Stock covered hereby (the "WARRANT SHARES"). The
"EXERCISE PRICE" for each Warrant Share purchased by the Holder upon the
exercise of this Warrant shall be equal to $3.50, subject to adjustment for the
events specified in Section 6 below.
(b) EXERCISE NOTICE. In order to exercise this Warrant, the Holder
shall send by facsimile transmission, at any time prior to 5:00 p.m., eastern
time, on the Business Day on which the Holder wishes to effect such exercise
(the "EXERCISE DATE"), to the Company an executed copy of the notice of exercise
in the form attached hereto as EXHIBIT A (the "EXERCISE NOTICE"), the original
Warrant and, in the case of a Cash Exercise (as defined below), the Exercise
Price. The Exercise Notice shall also state the name or names (with address) in
which the shares of Common Stock that are issuable on such exercise shall be
issued. If shares are to be issued in the name of a person other than the
Holder, the Holder will pay all transfer taxes payable with respect thereto. In
the case of a dispute as to the calculation of the Exercise Price or the number
of Warrant Shares issuable hereunder (including, without limitation, the
calculation of any adjustment pursuant to Section 6 below), the Company shall
promptly issue to the Holder the number of Warrant Shares that are not disputed
and shall submit the disputed calculations to a certified public accounting firm
of national recognition (other than the Company's independent accountants)
within two (2) Business Days following the date on which the Exercise Notice is
delivered to the Company. The Company shall cause such accountant to calculate
the Exercise Price and/or the number of Warrant Shares issuable hereunder and to
notify the Company and the Holder of the results in writing no later than three
(3) Business Days following the day on which such accountant received the
disputed calculations (the "DISPUTE PROCEDURE"). Such accountant's calculation
shall be deemed conclusive absent manifest error. The fees of any such
accountant shall be borne by the party whose calculations were most at variance
with those of such accountant.
(c) HOLDER OF RECORD. The. Holder shall, for all purposes, be deemed to
have become the holder of record of the Warrant Shares specified in an Exercise
Notice on the Exercise Date specified therein, irrespective of the date of
delivery of such Warrant Shares. Except as specifically provided herein, nothing
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company prior to the Exercise Date.
(d) CANCELLATION OF WARRANT. This Warrant shall be canceled upon its
exercise and, if this Warrant is exercised in part, the Company shall, at the
time that it delivers Warrant Shares to the Holder pursuant to such exercise as
provided herein, issue a new warrant, and deliver to the Holder a certificate
representing such new warrant, with terms identical in all respects to this
Warrant (except that such new warrant shall be exercisable into the number of
shares of Common Stock with respect to which this Warrant shall remain
unexercised); PROVIDED, HOWEVER, that the Holder shall be entitled to exercise
all or any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such new warrant or delivered to the Holder a certificate therefor.
2. DELIVERY OF WARRANT SHARES UPON EXERCISE. Upon receipt of an
Exercise Notice pursuant to paragraph 1 above, the Company shall, (A) in the
case of a Cash Exercise (as defined below) no later than the close of business
on the later to occur of (i) the third (3rd) Business Day following the Exercise
Date set forth in such Exercise Notice and (ii) the date on which the Company
has received payment of the Exercise Price and the taxes specified in paragraph
1(b) above, if any, are paid in full, (B) in the case of a Cashless Exercise (as
defined below), no later than the close of business on the third (3rd) Business
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Day following the Exercise Date set forth in such Exercise Notice, and (C) with
respect to Warrant Shares that are the subject of a Dispute Procedure, the close
of business on the third (3rd) Business Day following the determination made
pursuant to paragraph 1(b) (each of the dates specified in (A), (B) or (C) being
referred to as a "DELIVERY DATE"), issue and deliver or cause to be delivered to
the Holder the number of Warrant Shares as shall be determined as provided
herein. The Company shall effect delivery of Warrant Shares to the Holder by, as
long as the Transfer Agent participates in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer program ("FAST"), crediting the account of
the Holder or its nominee at DTC (as specified in the applicable Exercise
Notice) with the number of Warrant Shares required to be delivered, no later
than the close of business on such Delivery Date. In the event that the Transfer
Agent is not a participant in FAST, or if the Warrant Shares are not otherwise
eligible for delivery through FAST, or if the Holder so specifies in an Exercise
Notice or otherwise in writing on or before the Exercise Date, the Company shall
effect delivery of Warrant Shares by delivering to the Holder or its nominee
physical certificates representing such Warrant Shares, no later than the close
of business on such Delivery Date.
3. FAILURE TO DELIVER WARRANT SHARES.
(a) In the event that the Company fails for any reason to deliver to
the Holder the number of Warrant Shares specified in the applicable Exercise
Notice on or before the Delivery Date therefor (an "EXERCISE DEFAULT"), and
`such default continues for five (5) Business Days following delivery of a
written notice of such default by the Holder to the Company, the Company shall
pay to the Holder payments ("EXERCISE DEFAULT PAYMENTS") in the amount of (i)
(N/365) MULTIPLIED BY (ii) the aggregate Exercise Price of the Warrant Shares
which are the subject of such Exercise Default MULTIPLIED BY (iii) the lower of
fifteen percent (15%) and the maximum rate permitted by applicable law (the
"DEFAULT INTEREST RATE"), where "N" equals the number of days elapsed between
the original Delivery Date of such Warrant Shares and the date on which all of
such Warrant Shares are issued and delivered to the Holder. Cash amounts payable
hereunder shall be paid on or before the fifth (5th) Business Day of each
calendar month following the calendar month in which such amount has accrued.
(b) The Holder's rights and remedies hereunder are cumulative, and no
right or remedy is exclusive of any other. In addition to the amounts specified
herein, the Holder shall have the right to pursue all other remedies available
to it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and deliver
Warrant Shares on the applicable Delivery Date (including, without limitation,
damages relating to any purchase of Common Stock by the Holder to make delivery
on a sale effected in anticipation of receiving Warrant Shares upon exercise,
such damages to be in an amount equal to (A) the aggregate amount paid by the
Holder for the Common Stock so purchased MINUS (B) the aggregate amount of net
proceeds, if any, received by the Holder from the sale of the Warrant Shares
issued by the Company pursuant to such exercise).
4. EXERCISE LIMITATIONS. In no event shall the Holder be permitted to
exercise this Warrant, or part thereof, if, upon such exercise, the number of
shares of Common Stock beneficially owned by the Holder (other than shares which
would otherwise be deemed beneficially owned except for being subject to a
limitation on conversion or exercise analogous to the limitation contained in
this paragraph 4), would exceed 4.99% of the number of shares of Common Stock
then issued and outstanding. As used herein, beneficial ownership shall be
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determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules thereunder. To the extent that the limitation
contained in this paragraph 4 applies, the submission of an Exercise Notice by
the Holder shall be deemed to be the Holder's representation that this Warrant
is exercisable pursuant to the terms hereof and the Company shall be entitled to
rely on such representation without making any further inquiry as to whether
this Section 4 applies. The Company shall have no liability to any person if the
Holder's determination of whether this Warrant is convertible pursuant to the
terms hereof is incorrect. Nothing contained herein shall be deemed to restrict
the right of a Holder to exercise this Warrant, or part thereof, at such time as
such exercise will not violate the provisions of this Section 4. This Section 4
may not be amended unless such amendment is agreed to in writing by the Holder
and approved by the holders of a majority of the Common Stock then outstanding;
PROVIDED, HOWEVER, that the Holder shall have the right, upon sixty (60) days'
prior written notice to the Company, to waive the provisions of this Section 4.
5. PAYMENT OF THE EXERCISE PRICE: CASHLESS EXERCISE. The Holder may pay
the Exercise Price in either of the following forms or, at the election of
Holder, a combination thereof:
(a) through a cash exercise (a "CASH EXERCISE") by delivering
immediately available funds, or
(b) if, following the one-year anniversary of the Issue Date, an
effective Registration Statement is not available for the resale of all of the
Warrant Shares issuable hereunder at the time an Exercise Notice is delivered to
the Company, through a cashless exercise (a "CASHLESS EXERCISE"). The Holder may
effect a Cashless Exercise by surrendering this Warrant to the Company and
noting on the Exercise Notice that the Holder wishes to effect a Cashless
Exercise, upon which the Company shall issue to the Holder a number of Warrant
Shares determined as follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to the Holder;
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised;
A = the Market Price as of the Exercise Date; and
B = the Exercise Price.
It is intended and acknowledged that the Warrant Shares issued in a
Cashless Exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares required by Rule 144 shall
be deemed to have been commenced, on the Issue Date. For purposes hereof, (A)
"MARKET PRICE" means, as of a particular date, the average of the Closing Prices
for the Common Stock occurring during the ten (10) Trading Day period ending on
(and including) the Trading Day immediately preceding such date, and (B)
"CLOSING PRICE" means, with respect to the Common Stock as of any Trading Day,
the closing price on such date for the Common Stock on the Principal Market as
reported by Bloomberg Financial Markets ("Bloomberg"), or if the Principal
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Market begins to operate on an extended hours basis, and does not designate the
closing price, then the last price at 4:00 p.m. (eastern time), as reported by
Bloomberg, or if the foregoing do not apply, the last closing price of the
Common Stock in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing price is reported for
such security by Bloomberg, the last closing trade price for such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the average of the prices of any market makers for such
security as reported in the "pink sheets" by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Price cannot be calculated for
the Common Stock on such date on any of the foregoing bases, then the Company
shall submit such calculation to an independent investment banking firm of
national reputation, and shall cause such investment banking firm to perform
such determination and notify the Company and each Investor of the results of
determination no later than two (2) Business Days from the time such calculation
was submitted to it by the Company. Such investment banking firm's determination
shall be deemed conclusive absent manifest error. All such determinations shall
be appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.
6. ANTI-DILUTION ADJUSTMENTS; DISTRIBUTIONS; OTHER EVENTS. The Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6.
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company, at any
time after the Issue Date, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a greater number of shares, then after the date of record for
effecting such subdivision, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Company, at any time
after the Issue Date, combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such combination
will be proportionally increased.
(b) DISTRIBUTIONS. If the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend or otherwise (including without
limitation any dividend or distribution to the Company's stockholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary) (a
"DISTRIBUTION"), the Company shall deliver written notice of such Distribution
(a "DISTRIBUTION NOTICE") to the Holder at least fifteen (15) Business Days
prior to the earlier to occur of (i) the record date for determining
stockholders entitled to such Distribution (the "RECORD DATE") and (ii) the date
on which such Distribution is made (the "DISTRIBUTION DATE"). The Holder shall
be entitled, at its option (to be exercised by written notice delivered to the
Company on or before the fifteenth (15th) Business Day following the date on
which a Distribution Notice is delivered to the Holder), either (A) upon any
exercise of this Warrant on or after the Record Date, to be entitled to receive
on the Distribution Date (for any exercise effected on or prior to the
Distribution Date) or the applicable Delivery Date (for any exercise effected
after the Distribution Date), the amount of such assets which would have been
payable to the holder with respect to the shares of Common Stock issuable upon
such exercise (without giving effect to any limitations on such exercise
contained in this Warrant) had the Holder been the holder of such shares of
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Common Stock on the Record Date or (B) upon any exercise of this Warrant on or
after the Record Date, to reduce the Exercise Price applicable to such exercise
by reducing the Exercise Price in effect on the Business Day immediately
preceding the Record Date by an amount equal to the fair market value of the
assets to be distributed divided by the number of shares of Common Stock as to
which such Distribution is to be made, such fair market value to be reasonably
determined by a nationally recognized investment banking firm retained by the
Company and reasonably acceptable to the holders of a majority of the
Outstanding Registrable Securities.
(c) DILUTIVE ISSUANCES.
(i) ADJUSTMENT UPON DILUTIVE ISSUANCE. If, at any time after
the Issue Date, the Company issues or sells, or in accordance with subparagraph
(iii) of this paragraph (c), is deemed to have issued or sold, any shares of
Common Stock for no consideration or for a consideration per share less than
..the Exercise Price on the date of such issuance or sale (or deemed issuance or
sale) (a "DILUTIVE ISSUANCE"), then the Exercise Price shall be adjusted as
follows:
(A) If such Dilutive Issuance occurs prior to the Effective
Date (as defined in the Registration Rights Agreement), then effective
immediately upon the Dilutive Issuance, the Exercise Price shall be
adjusted so as to equal the consideration received or receivable by the
Company (on a per share basis) for the additional shares of Common
Stock so issued, sold or deemed issued or sold in such Dilutive
Issuance (which, in the case of a deemed issuance or sale, shall be
calculated in accordance with subparagraph (ii) below). Notwithstanding
the foregoing, prior to the Effective Date, the Company shall not
engage in any transaction that would result in the issuance or deemed
issuance of shares of Common Stock (other than Excluded Securities (as
defined below) for no consideration.
(B) If such Dilutive Issuance occurs on or after the Effective
Date, then effective immediately upon the Dilutive Issuance, the
Exercise Price shall be adjusted so as to equal an amount determined by
multiplying such Exercise Price by the following fraction:
N0+/-N1
-------
N0+N2
where:
N0 = the number of shares of Common Stock outstanding
immediately prior to the issuance, sale or deemed
issuance or sale of such additional shares of Common
Stock in such Dilutive Issuance (without taking into
account any shares of Common Stock issuable upon
conversion, exchange or exercise of any securities or
other instruments which are convertible into or
exercisable or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") or options, warrants or
other rights to purchase or subscribe for Common
Stock or Convertible Securities ("PURCHASE Rights"),
including the Additional Investment Rights and
Warrants);
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Xx = the number of shares of Common Stock which the
aggregate consideration, if any, received or
receivable by the Company for the total number of
such additional shares of Common Stock so issued,
sold or deemed issued or sold in such Dilutive
Issuance (which, in the case of a deemed issuance or
sale, shall be calculated in accordance with
subparagraph (iii) below) would purchase at the
Exercise Price in effect immediately prior to such
Dilutive Issuance; and
N2 = the number of such additional shares of Common
Stock so issued, sold or deemed issued or sold in
such Dilutive Issuance.
Notwithstanding the foregoing, no adjustment shall be made
pursuant hereto if such adjustment would result in an increase in the Exercise
Price.
(ii) ADJUSTMENT UPON BELOW MARKET ISSUANCE. If, at any time
after the Issue Date, the Company issues or sells, or in accordance with
subparagraph (iii) of this paragraph (c), is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
less than the Market Price on the date of such issuance or sale (or deemed
issuance or sale) (a "BELOW MARKET ISSUANCE"), then the Exercise Price shall be
adjusted so as to equal an amount determined by multiplying such Exercise Price
by the following fraction:
N0+N1
-------
N0 + N2
where:
N0 = the number of shares of Common Stock outstanding
immediately prior to the issuance, sale or deemed
issuance or sale of such additional shares of Common
Stock in such Below Market Issuance (without taking
into account any shares of Common Stock issuable upon
conversion, exchange or exercise of any Convertible
Securities or Purchase Rights, including the
Additional Investment Rights and Warrants);
Nl = the number of shares of Common Stock which the
aggregate consideration, if any, received or
receivable by the Company for the total number of
such additional shares of Common Stock so issued,
sold or deemed issued or sold in such Below Market
Issuance (which, in the case of a deemed issuance or
sale, shall be calculated in accordance with
subparagraph (iii) below) would purchase at the
Market Price in effect on the date of such Below
Market Issuance; and
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N2 = the number of such additional shares of Common
Stock so issued, sold or deemed issued or sold in
such Below Market Issuance.
Notwithstanding the foregoing, no adjustment shall be made
pursuant to this paragraph (c)(ii) if such adjustment would result in
an increase in the Exercise Price or if such adjustment would lead to a
higher exercise price than an adjustment pursuant to paragraph c(i), in
which case the provisions of paragraph (c)(i) shall apply.
(iii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under subparagraph (i) or (ii) of
this paragraph (c), the following will be applicable:
(A) ISSUANCE OF PURCHASE RIGHTS. If the Company issues or
sells any Purchase Rights, whether or not immediately exercisable, and
the price per share for which Common Stock is issuable upon the
exercise of such Purchase Rights (and the price of any conversion of
Convertible Securities, if applicable) is less than the Exercise Price
in effect on the date of issuance or sale of such Purchase Rights, then
the maximum total number of shares of Common Stock issuable upon the
exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable) shall,
as of the date of the issuance or sale of such Purchase Rights, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon
the exercise of such Purchase Rights" shall be determined by dividing
(x) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Purchase Rights,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Purchase Rights,
PLUS, in the case of Convertible Securities issuable upon the exercise
---- of such Purchase Rights, the minimum aggregate amount of
additional consideration payable upon the conversion, exercise or
exchange thereof (determined in accordance with the calculation method
set forth in subparagraph (iii)(B) below) at the time such Convertible
Securities first become convertible, exercisable or exchangeable, by
(y) the maximum total number of shares of Common Stock issuable upon
the exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable). No
further adjustment to the Exercise Price shall be made upon the actual
issuance of such Common Stock upon the exercise of such Purchase Rights
or upon the conversion, exercise or exchange of Convertible Securities
issuable upon exercise of such Purchase Rights. To the extent that
shares of Common Stock or Convertible Securities are not delivered
pursuant to. such Purchase Rights, upon the expiration or termination
of such Purchase Rights, the Exercise Price shall be readjusted to the
Exercise Price that would then be in effect had the adjustments made
upon the issuance of such Purchase Rights been made on the basis of
delivery of only the number of shares of Common Stock actually
delivered.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company issues
or sells any Convertible Securities, whether or not immediately
convertible, exercisable or exchangeable, and the price per share for
which Common Stock is issuable upon such conversion, exercise or
exchange is less than the Exercise Price in effect on the date of
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issuance or sale of such Convertible Securities, then the maximum total
number of shares of Common Stock issuable upon the conversion, exercise
or exchange of all such Convertible Securities shall, as of the date of
the issuance or sale of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for such
price per share. If the Convertible Securities so issued or sold do not
have a fluctuating conversion or exercise price or exchange ratio, then
for the purposes of the immediately preceding sentence, the "price per
share for which Common Stock is issuable upon such. conversion,
exercise or exchange" shall be determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration
for the issuance or sale of all such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method set forth in this
subparagraph (iii)(B)) at the time such Convertible Securities first
become convertible, exercisable or exchangeable, by (B) the maximum
total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities. If the
Convertible Securities so issued or sold have a fluctuating conversion
or exercise price or exchange ratio (a "VARIABLE RATE CONVERTIBLE
SECURITY") provided, however, that if the conversion or exercise price
or exchange ratio of a Convertible Security may fluctuate solely as a
result of provisions designed to protect against dilution, such
Convertible Security shall not be deemed to be a Variable Rate
Convertible Security, then for purposes of the first sentence of this
subparagraph (B), the "price per share for which Common Stock is
issuable upon such conversion, exercise or exchange" shall be deemed to
be the lowest price per share which would be applicable (assuming all
holding period and other conditions to any discounts contained in such
Variable Rate Convertible Security have been satisfied) if the
conversion price of such Variable Rate Convertible Security on the date
of issuance or sale thereof were seventy-five percent (75%) of the
actual conversion price on such date (the "ASSUMED VARIABLE MARKET
PRICE"), and, further, if the conversion price of such Variable Rate
Convertible Security at any time or times thereafter is less than or
equal to the Assumed Variable Market Price last used for making any
adjustment under this paragraph (c) with respect to any Variable Rate
Convertible Security, the Exercise Price in effect at such time shall
be readjusted to equal the Exercise Price which would have resulted if
the Assumed Variable Market Price at the time of issuance of the
Variable Rate Convertible Security had been seventy-five percent (75%)
of the actual conversion price of such Variable Rate Convertible
Security existing at the time of the adjustment required by this
sentence. No further adjustment to the Exercise Price shall be made
upon the actual issuance of such Common Stock upon conversion, exercise
or exchange of such Convertible Securities. To the extent that shares
of Common Stock are not delivered pursuant to conversion of such
Convertible Securities, upon the expiration or termination of the right
to convert such Convertible Securities into Common Stock, the Exercise
Price shall be readjusted to the Exercise Price that would then be in
effect had the adjustments made upon the issuance of such Convertible
Securities been made on the basis of delivery of only the number of
shares of Common Stock actually delivered.
(C) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (x) the amount of additional consideration
payable to the Company upon the exercise of any Purchase Rights; (y)
the amount of additional consideration, if any, payable to the Company
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upon the conversion, exercise or exchange of any Convertible
Securities; or (z) the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed to
protect against dilution), then in any such case, the Exercise Price in
effect at the time of such change shall be readjusted to the Exercise
Price which would have been in effect at such time had such Purchase
Rights or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion, exercise or
exchange rate, as the case may be, at the time initially issued or
sold.
(D) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Purchase Rights or Convertible Securities are issued or sold for
cash, the consideration received therefor will be the amount received
by the Company therefor. In case any Common Stock, Purchase Rights or
Convertible Securities are issued or sold for a consideration part or
all of which shall be other than cash, including in the case of a
strategic or similar arrangement in which the other entity will provide
services to the Company, purchase services from the Company or
otherwise provide intangible consideration to the Company, the amount
of the consideration other than cash received by the Company (including
the net present value of the consideration expected by the Company for
the provided or purchased services) shall be the fair market value of
such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Company will be the average of the last sale prices thereof on the
principal market for such securities during the period of ten Trading
Days immediately preceding the date of receipt. In case any Common
Stock, Purchase Rights or Convertible Securities are issued in
connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor will be
deemed to be the fair market value of such portion of the net assets
and business of the non-surviving corporation as is attributable to
such Common Stock, Purchase Rights or Convertible Securities, as the
case may be. Notwithstanding anything else herein to the contrary, if
Common Stock, Purchase Rights or Convertible Securities are issued or
sold in conjunction with each other as part of a single transaction or
in a series of related transactions, the Holder may elect to determine
the amount of consideration deemed to be received by the Company
therefor by deducting the fair value of any type of securities (the
"DISREGARDED SECURITIES") issued or sold in such transaction or series
of transactions. If the holder makes an election pursuant to the
immediately preceding sentence, no adjustment to the Exercise Price
shall be made pursuant to this paragraph (c) for the issuance of the
Disregarded Securities or upon any conversion, exercise or exchange
thereof. The independent members of the Corporation's Board of
Directors shall calculate reasonably and in good faith, using standard
commercial valuation methods appropriate for valuing such assets, the
fair market value of any consideration other than cash or securities.
(E) ISSUANCES PURSUANT TO EXISTING SECURITIES. If the Company
issues (or becomes obligated to issue) shares of Common Stock pursuant
to any antidilution or similar adjustments (other than as a result of
stock splits, stock dividends and the like) contained in any
Convertible Securities or Purchase Rights outstanding as of the date
hereof but not included in the Disclosure Schedule to the Securities
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Xxxxxxxx Xxxxxxxxx, then all shares of Common Stock so issued shall be
deemed to have been issued for no consideration. If the Company issues
(or becomes obligated to issue) shares of Common Stock pursuant to any
antidilution or similar adjustments contained in any Convertible
Securities or Purchase Rights disclosed in a schedule to the Securities
Purchase Agreement as a result of the issuance of the Additional
Investment Rights or Warrants and the number of shares that the Company
issues (or is obligated to issue) as a result of such initial issuance
exceeds the amount specified in such schedule, such excess shares shall
be deemed to have been issued for no consideration.
(iv) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE.
Notwithstanding the foregoing, no adjustment to the Exercise Price shall be made
pursuant to this paragraph (c) upon the issuance of any Excluded Securities. For
purposes hereof, "EXCLUDED SECURITIES" means (I) securities purchased under the
Securities Purchase Agreement; (II) securities issued upon exercise of the
Additional Investment Rights or the Warrants; (III) shares of Common Stock
issuable or issued to (x) employees or directors from time to time upon the
exercise of options, in such case granted or to be granted in the discretion of
the Board of Directors pursuant to one or more stock option plans or restricted
stock plans in effect as of the Issue Date or adopted after the Issue Date by
the independent members of the Board of Directors with substantially the same
terms as such plans in effect as of the Issue Date, and (y) vendors pursuant to
warrants to purchase Common Stock that are outstanding on the date hereof or
issued hereafter, provided such issuances are approved by the Board of
Directors; (IV) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization of the Company; (V) shares of Common
Stock issued in connection with the acquisition by the Company of any
corporation or other entity occurring after the Effective Date and as long as a
fairness opinion with respect to such acquisition is rendered by an investment
bank of national recognition; (VI) shares of Common Stock issued in connection
with any Convertible Securities or Purchase Rights outstanding on the date
hereof and (VII) shares issued to Persons with whom the Corporation is entering
into a joint venture, strategic alliance or other commercial relationship in
connection with the operation of the Company's business and not in connection
with a transaction the primary purpose of which is to raise equity capital.
(v) NOTICE OF ADJUSTMENTS. Upon the occurrence of one or more
adjustments or readjustments of the Exercise Price pursuant to this paragraph
(c) resulting in a change in the Exercise Price by more than one percent (1%) in
the aggregate, or any change in the number or type of stock, securities and/or
other property issuable upon exercise of this Warrant, the Company, at its
expense, shall promptly compute such adjustment or readjustment or change and
prepare and furnish to the Holder a certificate setting forth such adjustment or
readjustment or change and showing in detail the facts upon which such
adjustment or readjustment or change is based. The Company shall, upon the
written request at any time of the Holder, furnish to the Holder a like
certificate setting forth (i) such adjustment or readjustment or change, (ii)
the Exercise Price at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon exercise of this Warrant.
(d) MAJOR TRANSACTIONS. In the event of a merger, consolidation,
business combination, tender offer, exchange of shares, recapitalization,
reorganization, redemption or other similar event, as a result of which shares
of Common Stock of the Company shall be changed into the same or a different
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number of shares of the same or another class or classes of stock or securities
or other assets of the Company or another entity or the Company shall sell all
or substantially all of its assets (each of the foregoing being a "MAJOR
TRANSACTION"), the Company will give the Holder at least thirty (30) days
written notice prior to the closing of such Major Transaction (which period
shall be increased to sixty one (61) days if, at such time, without giving
effect to the limitation on exercise contained in paragraph 4 hereof, the Holder
would beneficially own more. than 4.99% of the Common Stock then outstanding);
provided, however, that the Company shall publicly disclose the terms of any
such Major Transaction on or before the date on which it delivers notice of a
Major Transaction to the Holder. Upon the occurrence of a Major Transaction, (i)
the Holder shall be permitted to exercise this Warrant in whole or in part at
any time prior to the record date for the receipt of such consideration and
shall be entitled to receive, for each share of Common Stock issued to Holder
for such exercise, the same per share consideration paid to the other holders of
Common Stock in connection with such Major Transaction, and (ii) if and to the
extent that the Holder retains any portion of this Warrant following such record
date, the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to assume
the obligations of the Company under this Warrant, with such adjustments to the
Exercise Price and the securities covered hereby as are deemed appropriate by
the Company's Board of Directors in order to preserve the economic benefits of
this Warrant to the Holder.
(e) ADJUSTMENTS; ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event
that at any time, as a result of an adjustment made pursuant to this paragraph
6, the Holder of this Warrant shall, upon exercise of this Warrant, become
entitled to receive securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this paragraph 6. Any adjustment
made herein other than pursuant to Section 6(c) hereof that results in a
decrease in the Exercise Price shall also effect a proportional increase in the
number of shares of Common Stock into which this Warrant is exercisable.
7. FRACTIONAL INTERESTS.
No fractional shares or scrip representing fractional shares
shall be issuable upon the exercise of this Warrant. If, on exercise of this
Warrant, the Holder hereof would be entitled to a fractional share of Common
Stock or a right to acquire a fractional share of Common Stock, the Company
shall, in lieu of issuing any such fractional share, pay to the Holder an amount
in cash equal to the product resulting from multiplying such fraction by the
Market Price as of the Exercise Date.
8. TRANSFER OF THIS WARRANT.
The Holder may sell, transfer, assign, pledge or otherwise
dispose of this Warrant, in whole or in part, as long as such sale or other
disposition is made pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities Act, and
applicable state securities laws, and is otherwise made in accordance with the
applicable provisions of the Securities Purchase Agreement. Upon such transfer
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or other disposition, the Holder shall deliver this Warrant to the Company
together with a written notice to the Company, substantially in the form of the
Transfer Notice attached hereto as EXHIBIT B (the "TRANSFER NOTICE"), indicating
the person or persons to whom this Warrant shall be transferred and, if less
than all of this Warrant is transferred, the number of Warrant Shares to be
covered by the part of this Warrant to be transferred to each such person.
Within three (3) Business Days of receiving a Transfer Notice and the original
of this Warrant, the Company shall deliver to the each transferee designated by
the Holder a Warrant or Warrants of like tenor and terms for the appropriate
number of Warrant Shares and, if less than all this Warrant is transferred,
shall deliver to the Holder a Warrant for the remaining number of Warrant
Shares.
9. BENEFITS OF THIS WARRANT.
This Warrant shall be for the sole and exclusive benefit of
the Holder of this Warrant and nothing in this Warrant shall be construed to
confer upon any person other than the Holder of this Warrant any legal or
equitable right, remedy or claim hereunder.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity reasonably satisfactory to the Company, and upon
surrender of this Warrant, if mutilated, the Company shall execute and deliver a
new Warrant of like tenor and date.
11. NOTICE OR DEMANDS.
Any notice, demand or request required or permitted to be
given by the Company or the Holder pursuant to the terms of this Warrant shall
be in writing and shall be deemed delivered (i) when delivered personally or by
verifiable facsimile transmission, unless such delivery is made on a day that is
not a Business Day, in which case such delivery will be deemed to be made on the
next succeeding Business Day, (ii) on the next Business Day after timely
delivery to an overnight courier and (iii) on the Business Day actually received
if deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:
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IF TO THE COMPANY:
Raptor Networks Technology, Inc.
00 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attn: Xxx Xxxxxxxxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
WITH A COPY TO:
Xxxxxx X. Xxxxxxx, Esq.
000 X.X. Xxxxx Xxxxxx
Xx. Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to the Holder, to such address as shall be designated by the Holder in
writing to the Company.
12. TAXES.
(a) The issue of stock certificates on exercises of this Warrant shall
be made without charge to the exercising Holder for any tax in respect of the
issue thereof. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
stock in any name other than that of the Holder of any Warrant exercised, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company, that such tax has been paid.
(b) Notwithstanding any other provision of this Warrant or any other
Transaction Document, for income tax purposes, any assignee or transferee shall
agree that the Company and the Transfer Agent shall be permitted to withhold
from any amounts payable to such assignee or transferee any taxes required by
law to be withheld from such amounts. Unless exempt from the obligation to do
so, each assignee or transferee shall, upon request, execute and deliver, to the
Company or the Transfer Agent, as applicable, a properly completed Form W-8 or
W-9, indicating that such assignee or transferee is not subject to back-up
withholding for United States Federal income tax purposes.
13. APPLICABLE LAW.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within the State of
New York.
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14. AMENDMENTS.
No amendment, modification or other change to, or waiver of
any provision of, this Warrant may be made unless such amendment, modification
or change is (A) set forth in writing and is signed by the Company and the
Holder and (B) agreed to in writing by the holders of at least sixty-six percent
(66%) of the number of shares into which the Warrants are exercisable (without
regard to any limitation contained therein on such exercise), it being
understood that upon the satisfaction of the conditions described in (A) and (B)
above, each Warrant (including any Warrant held by the Holder who did not
execute the agreement specified in (B) above) shall be deemed to incorporate any
amendment, modification, change or waiver effected thereby as of the effective
date thereof.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.
RAPTOR NETWORKS TECHNOLOGY, INC.
By:
-----------------------------
Xxxxxx X. Xxxxxxxxxxxxxxx
Chief Executive Officer
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EXHIBIT A TO WARRANT
--------------------
EXERCISE NOTICE
---------------
The undersigned Holder hereby irrevocably exercises the right to
purchase __________ of the shares of Common Stock ("WARRANT SHARES") of RAPTOR
NETWORKS TECHNOLOGY, INC. evidenced by the attached Warrant (the "WARRANT").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1. FORM OF EXERCISE PRICE. The Holder intends that payment of the
Exercise Price shall be made as:
_____ a Cash Exercise with respect to _______________ Warrant
Shares; and/or
_____ a Cashless Exercise with respect to __________________
Warrant Shares, as permitted by Section 5(b) of the attached
Warrant.
2. PAYMENT OF EXERCISE PRICE. In the event that the Holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $_______________ to the Company
in accordance with the terms of the Warrant.
Date: _______________________________________________
_____________________________________________________
Name of Registered Holder
By: _________________________________________________
Name:
Title:
EXHIBIT B TO WARRANT
--------------------
TRANSFER NOTICE
---------------
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase _______ shares of the Common Stock of RAPTOR NETWORKS TECHNOLOGY, INC.
evidenced by the attached Warrant.
Date: _______________________________________________
_____________________________________________________
Name of Registered Holder
By: _________________________________________________
Name:
Title:
Transferee Name and Address: _________________________________________
_________________________________________
_________________________________________
