NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIDELITY HOLDINGS, INC.
ADJUSTABLE WARRANT
Warrant No. [ ] Dated: February 8, 2000
Fidelity Holdings, Inc., a Nevada corporation (the "Company"), hereby
certifies that, for value received, [ ], or its registered assigns ("Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company
up to the total number of shares of Common Stock, $.01 par value per share (the
"Common Stock"), of the Company (each such share, a "Warrant Share" and all such
shares, the "Warrant Shares") calculated pursuant to Section 3 of this Warrant
at an exercise price equal to $.01 per share (as adjusted from time to time as
provided in Section 9, the "Exercise Price"), at the times set forth herein
through and including the Third Vesting Period Expiration Date (as defined in
Section 3(a)(iii) hereof) (the "Expiration Date"), and subject to the following
terms and conditions (certain terms used herein are defined in Exhibit A
attached hereto):
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company
at the address specified in Section 13. Upon any such registration or
transfer, a new warrant to purchase Common Stock, in substantially the
form of this Warrant (any such new warrant, a "New Warrant"), evidencing
the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall
be deemed the acceptance of such transferee of all of the rights and
obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at the address specified in Section 13
for one or more New Warrants, evidencing in the aggregate the right to
purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. Duration, Vesting and Exercise of Warrant.
(a) The vesting of the Warrant Shares which the Holder is permitted
to acquire pursuant to this Warrant shall occur on the dates set forth
below in this Section 3(a). On each such date, this Warrant shall vest
with respect to a number of Warrant Shares calculated pursuant to Section
3(b) below. Warrant Shares that have vested on a Vesting Date (as defined
below) may be acquired by the Holder at any time and from time to time
only during the forty (40) Trading Days following such Vesting Date, upon
exercise of this Warrant, provided, that each such forty (40) Trading Day
period shall be extended by the number of days during such period which
the Holder is for any reason unable to use the Underlying Shares
Registration Statement or the prospectus thereunder in order to sell
securities thereunder.
(i) The first vesting date (the "First Vesting Date") shall be
the fortieth (40th) Trading Day following the Effectiveness Date,
provided, that if the Effectiveness Date shall not have occurred
prior to the Effectiveness Required Date, then at the option of the
Holder (exercisable by notice delivered to the Company no later than
three (3) Trading Days following the Effectiveness Required Date),
the First Vesting Date shall occur on the (30th) Trading Day
following the Effectiveness Required Date (the Warrant Shares with
respect to which this Warrant is exercisable on the First Vesting
Date are called the "First Reset Warrant Shares");
(ii) The second vesting date (the "Second Vesting Date") shall
be the fortieth (40th) Trading Day following the First Vesting Date
(the Warrant Shares with respect to which this Warrant is
exercisable on the Second Vesting Date are called the "Second Reset
Warrant Shares"); and
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(iii) The third vesting date (the "Third Vesting Date," and
together with the First Vesting Date and the Second Vesting Date,
the "Vesting Dates") shall be the fortieth (40th) Trading Day (such
forty (40) Trading Period, as extended pursuant to the last sentence
of Section 3(a), the "Third Vesting Date Expiration Date") following
the Second Vesting Date (the Warrant Shares with respect to which
this Warrant is exercisable on the Third Vesting Date are called the
"Third Reset Warrant Shares").
(b) Except as otherwise set forth in this Warrant, this Warrant
shall vest and become exercisable on each Vesting Date with respect to the
number of Warrant Shares calculated in accordance with the following
formula:
(Applicable Share Number) x [(Purchase Price x 1.15) - Adjustment Price]
------------------------------------------------------------------------
Adjustment Price
If the number calculated in accordance with the foregoing formula is zero
or a negative number, the Holder shall not be obligated to transfer any shares
of Common Stock to the Company. On each Vesting Date, the Company shall send a
notice to the Holder setting forth in reasonable detail its calculation of the
number of Warrant Shares which shall vest and be exercisable on such Vesting
Date. Notwithstanding anything to the contrary set forth herein, if, on any
Trading Day occurring after the Effectiveness Date during which (1) for the
immediately preceding fifteen (15) Trading Days there was an effective
Underlying Shares Registration Statement pursuant to which the Holder was
permitted to resell Underlying Shares and (2) the average of the Per Share
Market Values for the fifteen (15) Trading Days immediately preceding such date
equaled or exceeded $22.50 (the "Threshold Price"), then this Warrant shall not
vest for any Warrant Shares with respect to any Vesting Date that would occur
after the expiration of such fifteen (15) Trading Day period, provided, that the
application of this sentence shall have no effect on the vesting of Warrant
Shares in respect of a Vesting Date unless all of the Trading Days used to
calculate such fifteen (15) Trading Day average occurred prior to the 15th
Trading Day immediately preceding such Vesting Date, but shall terminate vesting
rights with respect to subsequent Vesting Dates, if any.
(c) The vesting of the Warrant Shares in accordance with this
Section 3 shall not be affected by any failure by the Company to cause the
Underlying Shares Registration Statement declared effective by the
Commission or maintain the effectiveness of the Underlying Shares
Registration Statement after it has been declared effective by the
Commission.
(d) Notwithstanding anything herein to the contrary, if on any
Vesting Date the Adjustment Price shall be less than $10.00 (such an
Adjustment Price, the "Floor Price"), then on such Vesting Date: (i) this
Warrant shall vest with respect to the Warrant Shares pursuant to Section
3(a) and (b) hereof, provided, that the Adjustment Price pursuant to the
formula set forth in Section 3(b) shall, exclusively for purposes of this
Section 3(d)(i), equal the Floor Price (such number of Warrant
-3-
Shares, the "Initial Shares") and (ii) with respect to the Warrant Shares
whose vesting would result in a vesting of Warrant Shares in excess of the
Initial Shares, the Company will have the option to elect by written
notice (the "Notice") delivered to the Holder no later than twenty (20)
Trading Days prior to the applicable Vesting Date to either (x) pay to the
Holder, in cash (the "Cash Payment"), within three (3) Trading Days from
the Vesting Date at issue, an amount equal to the product obtained by
multiplying (A) the applicable Adjustment Price and (B) the difference
between the number of Warrant Shares which would have otherwise vested on
such Vesting Date pursuant to Section 3(a) and (b) hereof and the Initial
Shares (such number of Warrant Shares, the "Subsequent Shares") or (y)
allow this Warrant to vest with respect to the Subsequent Shares. A
failure by the Company to deliver the Notice to the Holder pursuant to the
terms of this Section shall constitute an election by the Company to allow
this Warrant to vest as to the Subsequent Shares pursuant to the terms
hereof. If the Company shall fail to pay the Cash Payment in full to the
Holder by the third (3rd) Trading Day from the Vesting Date at issue,
then, at the election of the Holder, the Company shall either (x) pay to
the Holder $5,000 per day until the Cash Payment and all additional
payments due hereunder are paid in full, or (y) allow this Warrant to vest
with respect to the Subsequent Shares.
(e) Notwithstanding the foregoing provisions of this Section 3, at
any time within ten (10) Trading Days following the occurrence of any of
the following events (each, an "Event"), the Holder shall have the option
to elect by notice ("Vesting Notice") to the Company to have this Warrant
vest with respect to those Warrant Shares that have not yet already
vested:
(i) The occurrence of a Change of Control Transaction;
(ii) Immediately prior to an assignment by the Company for the
benefit of creditors or commencement of a voluntary case under the
Federal Bankruptcy Code, or an entering into of an order for relief
in an involuntary case under the Federal Bankruptcy Code, or
adoption by the Company of a plan of liquidation or dissolution;
(iii) Five (5) Business Days prior to the proposed
consummation with respect to the Company of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act (or, if
necessary, such earlier date as the Company shall determine in good
faith to be required in order for the Holder to be able to
participate in such transaction), it being agreed that the Holder
will receive actual notice of the 13e-3 Statement filed with the
Commission on the date filed and actual notice of the date of
acceleration hereunder no later than such date, and that if such
transaction is not consummated, and this Warrant has been exercised,
then the Holder (and to the extent that this Warrant would not but
for this paragraph be exercisable, the Company) shall be entitled to
declare
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the exercise null and void and the Holder shall, upon return of the
Warrant Shares to the Company, be entitled to receive a refund of
the Exercise Price and warrants identical to this Warrant, and such
acceleration shall become void ab initio, and the Warrants shall (as
to any remaining unexercised portion thereof) remain in full force
and effect in accordance with the terms hereof;
(iv) For any period of three (3) Trading Days (which need not
be consecutive Trading Days) commencing on or after the date of
issuance of this Warrant, there shall be no closing bid price on the
Common Stock on the Nasdaq or a Subsequent Market;
(v) The Common Stock fails to be listed or quoted for trading
on the Nasdaq or a Subsequent Market or for a period of three (3)
Trading Days (which need not be consecutive Trading Days);
(vi) A holder of Registrable Securities (as defined in the
Registration Rights Agreement) is not permitted to sell Registrable
Securities under an Underlying Shares Registration Statement for any
reason for five (5) or more days (whether or not consecutive); or
(vii) The Company shall fail or default in the timely
performance of any material obligation under the Transaction
Documents and such failure or default shall continue uncured for a
period of five (5) Business Days after the date on which notice of
such failure or default is first given to the Company (it being
understood that no prior notice need be provided in the case of
defaults which cannot reasonably be cured within a 5-day period);
provided that no such failure or default shall be considered to have
occurred for purposes of this clause (vii) for a failure of an
Underlying Shares Registration Statement to be declared effective
until the 150th day after the issuance of this Warrant.
In the event the Holder delivers a Vesting Notice, this Warrant
shall vest with respect to the number of Warrant Shares calculated in accordance
with the formula set forth on Section 3(b); provided, however that for purposes
of such calculation, (i) the "Applicable Share Number" shall be deemed to mean
(A) 100% of the number of shares of Common Stock purchased by the Holder
pursuant to the Purchase Agreement (such number, the "Holder Purchased Shares"),
if the Event occurred prior to the First Vesting Date, (B) 66% of the Holder
Purchased Shares, if the Event occurred on or after the First Vesting Date but
prior to the Second Vesting Date and (C) 33% of the Holder Purchased Shares if
the Event occurred on or after the Second Vesting Date but prior to the Third
Vesting Date; and (ii) the "Adjustment Price" shall be deemed to mean the
average of the ten (10) lowest Per Share Market Values (which need not occur on
consecutive Trading Days) during the forty (40) Trading Days immediately
preceding the date on which the Event occurred.
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(f) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 6:30 P.M.,
New York City time, at any time and from time to time on or after the date
hereof to and including the Expiration Date. At 6:30 P.M., New York City
time on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be and become void and of no value.
(g) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. If less than all of the
Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be
issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares for which no
exercise has been evidenced by this Warrant.
4. Delivery of Warrant Shares.
(a) Subject to Sections 2(b), 7 and 11, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth
in Section 13 and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase hereunder, in
the manner provided hereunder, all as specified by the Holder in the Form
of Election to Purchase, the Company shall promptly (but in no event later
than three (3) Trading Days after the Date of Exercise (as defined
herein)) issue or cause to be issued and cause to be delivered to or upon
the written order of the Holder and in such name or names as the Holder
may designate, a certificate for the Warrant Shares issuable upon such
exercise, free of restrictive legends, except in the event that both an
Underlying Shares Registration Statement is not then effective and the
Warrant Shares are not freely transferable without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). Any person so designated by the Holder to
receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by
the third (3rd) Trading Day after the Date of Exercise, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a penalty,
$5,000 for each day after such third (3rd) Trading Day until such
certificates are delivered. Nothing herein shall limit the
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Xxxxxx's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon exercise
within the period specified herein and the Holder shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable
law. The Company shall, upon request of the Holder, if available, use its
best efforts to deliver Warrant Shares hereunder electronically through
the Depository Trust Corporation or another established clearing
corporation performing similar functions.
(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates
representing the Warrant Shares pursuant to Section 4(a) by the third
(3rd) Trading Day after the Date of Exercise, and if after such third
(3rd) Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Warrant Shares which the Holder was entitled to receive
upon such exercise (a "Buy-In"), then the Company shall pay (1) in cash to
the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock
so purchased exceeds (y) the product of (A) the number of Warrant Shares
that the Company was required to deliver pursuant to Section 4(b) to the
Holder in connection with the exercise at issue and (B) the Per Share
Market Value at the time of the sale giving rise to such purchase
obligation and (2) deliver to the Holder the number of shares of Common
Stock that would have been issued had the Company timely complied with its
exercise and delivery obligations under Section 4(b). For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common
Stock with a market price on the date of exercise in the amount of
$10,000, under clause (1) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In. Notwithstanding anything contained herein
to the contrary, if the Holder requires the Company to make payment in
respect of a Buy-In for the failure to timely deliver certificates
hereunder and the Company timely pays in full such payment, the Company
shall not be required to pay such Holder liquidated damages under Section
4(b) in respect of the certificates resulting in such Buy-In.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same,
any waiver or consent with respect to any provision hereof, the recovery
of any judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination,
-7-
or any breach or alleged breach by the Holder or any other Person of any
obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder
in connection with the issuance of Warrant Shares. If the Company breaches
its obligations under this Warrant, then, in addition to any other
liabilities the Company may have hereunder and under applicable law, the
Company shall pay or reimburse the Holder on demand for all costs of
collection and enforcement (including reasonable attorneys fees and
expenses).
5. Piggyback Registration Rights. The Holder shall be entitled to the
piggyback registration rights afforded to a holder pursuant to Section 6(f) of
that certain Registration Rights Agreement dated as of the date hereof, among
the Company and the signatories thereto.
6. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid. The Holder
shall be responsible for all other tax liability that may arise as a result of
holding or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 9). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price
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in accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9. Upon each such adjustment of the Exercise
Price pursuant to this Section 9, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is outstanding,
(i) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or on any other class of
capital stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock into a larger number of shares, or
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding before
such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder shall have the right
thereafter to exercise this Warrant only for the shares of stock and other
securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange,
and the Holder shall be entitled upon such event to receive such amount of
securities, cash or property as equals the number of Warrant Shares such
Holder would have been entitled to had the Holder exercised this Warrant
in full immediately prior to such reclassification or share exchange. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of
this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those
referred to in Sections 9(a), (b) and (d)) (collectively, "Assets"), then
in each such case, the Holder shall be entitled to receive, for each
Warrant Share with respect to which this Warrant is exercised after the
record date fixed for determination of stockholders entitled to
-9-
receive such distribution, the Assets received by all holders of Common
Stock with respect to one share of Common Stock.
(d) If, within 90 Trading Days of any Vesting Date, the Company or
any subsidiary thereof shall issue or cause to be issued rights, warrants,
debt or other securities entitling the holder thereof to acquire, or shall
otherwise sell or distribute shares of Common Stock or other securities,
other than (i) issuances pursuant to any exercise or conversion of any
warrants, options, subscriptions, convertible notes, convertible
debentures, convertible preferred stock or other convertible securities
issued and outstanding on the Closing Date (as defined in the Purchase
Agreement) and set forth on Schedule 2.1(c) to the Purchase Agreement in
accordance with the terms of such securities as of such date; (ii)
issuances pursuant to any grant or exercise of any stock or options which
may hereafter be granted or exercised under any employee benefit plan of
the Company now existing or to be implemented in the future, or upon grant
or exercise of any stock or options to or by any officer, director or
employee, whether or not under a plan, so long as the issuance of such
stock or options is approved by a majority of the non-employee members of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose; (iii)
issuances pursuant to any Closing Warrants (as defined in the Purchase
Agreement) issued pursuant to the Purchase Agreement; (iv) securities
issued in connection with an underwritten public offering of the Company;
(v) securities issued in connection with any merger, acquisition or
consolidation, or purchase of assets or business from another person, so
long as the Company is the surviving corporation and that such transaction
is not primarily for the purpose of raising capital, or (vi) in connection
with the issuance of Common Stock, not in excess of 1% of the Common Stock
issued and outstanding on the original issue date of this Warrant, upon
the exercise of warrants or other rights granted to any bank other
commercial financing institution, for a consideration per share less than
both (x) the market price at the time of such issuance or distribution and
(y) an Adjustment Price previously used in calculating the vesting of
Warrant Shares on previous Vesting Date (such an issuance, a "Discounted
Issuance"), then the Adjustment Price previously used in calculating the
vesting of Warrant Shares on any previous Vesting Date (if greater than
such issuance price) shall equal the consideration per share at which such
Discounted Issuance was
-10-
made and the Company shall, within ten (10) Trading Days of such
Discounted Issuance, issue to the Holder a number of shares of Common
Stock equal to the difference between the number of Warrant Shares vested
on any previous applicable Vesting Date based on the Adjusted Price then
in effect and the number of Warrant Shares which would have vested on such
previous Vesting Dates based on the imputed Adjustment Price pursuant to
the Discounted Issuance. Such adjustment shall be made successively
whenever such an issuance is made.
(e) In case of any (1) merger or consolidation of the Company with
or into another Person, or (2) sale by the Company of more than one-half
of the assets of the Company (on a book value basis) in one or a series of
related transactions, or (3) tender or other offer or exchange (whether by
the Company or another Person) pursuant to which holders of Common Stock
are permitted to tender or exchange their shares for other securities,
stock, cash or property of the Company or another Person; then the Holder
shall have the right thereafter to (A) exercise this Warrant for the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such merger,
consolidation or sale, and the Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and
property as the shares of Common Stock for which this Warrant could have
been exercised immediately prior to such merger, consolidation or sales
would have been entitled, (B) in the case of a merger or consolidation,
require the surviving entity to issue to the Holder a warrant entitling
the Holder to acquire shares of such entity's common stock, which warrant
shall have terms identical (including with respect to exercise) to the
terms of this Warrant and shall be entitled to all of the rights and
privileges set forth herein and the agreements pursuant to which this
Warrant was issued (including, without limitation, as such rights relate
to the acquisition, transferability, registration and listing of such
shares of stock other securities issuable upon exercise thereof), or (C)
in the event of an exchange or tender offer or other transaction
contemplated by clause (3) of this Section, tender or exchange this
Warrant for such securities, stock, cash and other property receivable
upon or deemed to be held by holders of Common Stock that have tendered or
exchanged their shares of Common Stock following such tender or exchange,
and the Holder shall be entitled upon such exchange or tender to receive
such amount of securities, cash and property as the shares of Common Stock
for which this Warrant could have been exercised immediately prior to such
tender or exchange would have been entitled as would have been issued. In
the case of clause (B), the exercise price applicable for the newly issued
warrant shall be based upon the amount of securities, cash and property
that each share of Common Stock would receive in such transaction and the
Exercise Price immediately prior to the effectiveness or closing date for
such transaction. The terms of any such merger, sale, consolidation,
tender or exchange shall include such terms so as continue to give the
-11-
Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
(f) For the purposes of this Section 9, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common
Stock or in securities convertible or exchangeable into shares of
Common Stock, or (B) to subscribe for or purchase Common Stock or
securities convertible or exchangeable into shares of Common Stock,
then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held
by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(g) All calculations under this Section shall be made to the nearest
1/100th of a share.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock
of the Company, any consolidation or merger to which the Company is
a party, any sale or transfer of all or substantially all of the
assets of the Company, or any
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compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
one of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available
funds; or
(b) Cashless Exercise. The Holder shall surrender this Warrant to
the Company together with a notice of cashless exercise, in which event
the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock on the principal market or exchange in which the
Common Stock is then listed or traded, as reported by
Bloomberg Information Systems, Inc. (or any successor to
its function of reporting stock prices), for the five
(5) trading days immediately prior to (but not
including) the Date of Exercise.
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B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act of 1934 (the "Exchange Act") and the rules promulgated thereunder)
in excess of 4.999% of the then issued and outstanding shares of Common Stock,
including shares of Common Stock issuable upon such exercise and held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of an exercise hereunder, unless the exercise at issue would result in the
issuance of shares of Common Stock in excess of 4.999% of the then outstanding
shares of Common Stock without regard to any other shares of Common Stock which
may be beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular exercise hereunder and to
the extent that the Holder determines that the limitation contained in this
Section applies, the determination of which portion of this Warrant is
exercisable shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Form of Election to Purchase for a number of Warrant
Shares that would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
exercise for the maximum portion of this Warrant permitted to be exercised on
such Date of Exercise in accordance with the periods described herein and
disregard the balance of such Form of Election to Purchase, as if never
delivered The provisions of this Section may be waived by a Holder (but only as
to itself and not to any other Holder) upon not less than 61 days' prior notice
to the Company. Other Holders shall be unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares of Common
Stock issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares of Common Stock which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of
-14-
which portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall honor the exercise for the maximum portion of this Warrant
permitted to be exercised on such Date of Exercise in accordance with the
periods described herein and disregard the balance of such Form of Election to
Purchase, as if never delivered The provisions of this Section may be waived by
a Holder (but only as to itself and not to any other Holder) upon not less than
61 days' prior notice to the Company. Other Holders shall be unaffected by any
such waiver.
(c) If the Company Stock is then listed for trading on the
Nasdaq or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue, upon
exercise of this Warrant, in excess of a number of shares of Common Stock (the
"Issuable Maximum") equal to 879,683 shares of Common Stock less 1/3 of the
number of shares of Common Stock previously issued or issuable upon exercise of
any of the Company's adjustable warrants dated June 24, 1999 and numbered SR-1,
BH-1 and AS-1 (the "Prior Adjustable Warrants") and the Company's adjustable
warrants dated December 8, 1999 and numbered SR-2, A S-2 and M-2. The 879,683
shares of Common Stock equals 19.999% of the number of shares of Common Stock
outstanding immediately prior to the issuance of the Prior Adjustable Warrants
multiplied by the quotient obtained by dividing (x) the number of shares of
Common Stock issued and sold to the original Holder on the Closing Date by (y)
the number of shares of Common Stock issued and sold by the Company on the
Closing Date. If on any Date of Exercise (A) the Company Stock is listed for
trading on the Nasdaq or the Nasdaq SmallCap Market, (B) the Exercise Price then
in effect is such that the aggregate number of shares of Common Stock that would
then be issuable upon exercise in full of this Warrant, together with any shares
of Common Stock previously issued upon exercise of this Warrant, would equal or
exceed the Issuable Maximum, and (C) the Company shall not have previously
obtained the vote of shareholders, if any, as may be required by the applicable
rules and regulations of the Nasdaq Stock Market to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof (the "Shareholder Approval"), then the Company shall issue to the Holder
a number of shares of Common Stock equal to the Issuable Maximum and, with
respect to the shares whose issuance would result in an issuance of shares of
Common Stock in excess of the Issuable Maximum (the "Excess Warrant Shares"),
the Holder shall have the option to require the Company to either (1) use its
best efforts to obtain the Shareholder Approval applicable to such issuance as
soon as possible, but, in any event, no later than 60 days after such request or
(2) pay to the Holder an amount in cash equal to the product of (x) the Excess
Warrant Shares multiplied by (y) the closing sales price of the Common Stock on
(a) the date such Shareholder Approval was required to have been obtained or (b)
the Date of Exercise giving rise to the obligation to seek Shareholder Approval
(whichever is greater) (such amount, the "Cash Payment"). If the Holder shall
require the Company to use its best efforts to obtain the Shareholder Approval
pursuant to the immediately preceding sentence and the Company shall have failed
to obtain such Shareholder Approval on or prior to the 60th day following such
request (such date, the "Target Date"), the Company shall pay to the Holder the
Cash Payment no later than the 5th day following the Target Date. If the Company
fails to pay the Cash Payment in full pursuant to this Section within seven (7)
days after the date payable, the Company will pay interest on such
-15-
amount at a rate of 18% per annum, or such lesser maximum amount that is
permitted to be paid by applicable law, to the Holder, accruing daily from the
date payable until such amount, plus all such interest thereon, is paid in full.
The Company and the Holder understand and agree that shares of Common Stock
issued upon exercise of the Warrant and then held by the Holder or an Affiliate
thereof may not cast votes or be deemed outstanding for purposes of any vote to
obtain the Shareholder Approval.
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service
with next day delivery specified thereon, or (iv) upon actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to 00-00 Xxx Xxxxxxx Xxxx, Xxxxx
0000, Xxx Xxxxxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000, attention
Chief Financial Officer, or (ii) if to the Holder, to the Holder at the address
or facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section 13.
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant.
Upon thirty (30) days' notice to the Holder, the Company may appoint a new
warrant agent.
(b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation
to which the Company or any new warrant agent transfers substantially all
of its corporate trust or shareholders services business shall be a
successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause
-16-
notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the
Holder and their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall
be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this
Warrant. This Warrant shall inure to the sole and exclusive benefit of the
Company and the Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard
to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute
a part of this Warrant and shall not be deemed to limit or affect any of
the provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall
be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall
not in any way be affected or impaired thereby and the parties will
attempt in good faith to agree upon a valid and enforceable provision
which shall be a commercially reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Warrant.
[REMAINDER OF XXXX INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-17-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FIDELITY HOLDINGS, INC.
By: /s/ Xxxxx Xxxxx
---------------
Name: Xxxxx Xxxxx
Title: President and CEO
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Fidelity Holdings, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Fidelity
Holdings, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated:____________, ____ Name of Xxxxxx:
(Print)_______________________________
(By:)_________________________________
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Fidelity Holdings,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Fidelity Holdings, Inc. with full power
of substitution in the premises.
Dated:
____________, ____
__________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
__________________________________________________
Address of Transferee
__________________________________________________
__________________________________________________
In the presence of:
__________________________
Exhibit A
(i) "Adjustment Price" means the average of the ten (10) lowest Per
Share Market Values (which need not occur on consecutive Trading Days)
during the forty (40) Trading Days immediately preceding either a (i)
Vesting Date or (ii) Trading Day, as applicable.
(ii) "Applicable Share Number" means (i) with respect to the First
Vesting Date, 34% of the number of shares of Common Stock purchased by the
Holder pursuant to the Purchase Agreement and (ii) with respect to each of
the Second Vesting Date and the Third Vesting Date, 33% of the number of
shares of Common Stock purchased by the Holder pursuant to the Purchase
Agreement.
(iii) "Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other governmental action to close.
(iv) "Change of Control Transaction" means the occurrence of any of
(1) an acquisition after the date hereof by an individual or legal entity
or "group" (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of 33.33% of the voting securities of the Company, (2) a
replacement at one time or over time of more than one-half of the members
of the Board which is not approved by a majority of those individuals who
are members of the Board on the date of issuance of this Warrant (or by
those individuals who are serving as members of the Board on any date
whose nomination to the Board was approved by a majority of the members of
the Board who are members on the date of issuance of this Warrant), (3)
the merger of the Company with or into another entity where the directors
comprising the Board immediately prior to such transaction (or the first
to occur of any series of related transactions) do not comprise a majority
of the members of the board of directors of the surviving company
immediately following such transaction, (4) the merger of the Company with
or into another entity where the shareholders of the Company immediately
prior to such transaction (or the first to occur of any series of related
transactions) do not collectively own in excess of 66.66% of the
outstanding voting securities of the surviving company immediately
following such transaction, (5) the sale of all or substantially all of
the assets of the Company in one or a series of related transactions, (6)
the merger by the Company with or into another entity where the voting
securities of the surviving company are not listed or quoted for trading
on the Nasdaq or on a Subsequent Market, or (7) the execution by the
Company of an agreement providing for any of the events set forth above in
(1) - (6).
(v) "Commission" means the Securities and Exchange Commission.
(vi) "Effectiveness Date" means the date the Underlying Shares
Registration Statement is declared effective by the Commission.
(vii) "Effectiveness Required Date" means the 120th day following
the date of issuance of this Warrant.
(viii) "Nasdaq" means the Nasdaq National Market.
(ix) "Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
or on any Subsequent Market, or if there is no such price on such date,
then the closing bid price on the Nasdaq or on such Subsequent Market on
the date nearest preceding such date, or (b) if the Common Stock is not
then listed or quoted on the Nasdaq or a Subsequent Market, the closing
bid price for a share of Common Stock in the over- the-counter market, as
reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at
the close of business on such date, or (c) if the Common Stock is not then
reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the Common
Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an appraiser selected in good faith by the
Holders of a majority of the applicable Warrant Shares.
(x) "Purchase Agreement" means the Securities Purchase Agreement
dated as of the date hereof, between the Company and the original Holder
hereof.
(xi) "Purchase Price" means $15.00.
(xii) "Securities" shall have the meaning set forth in the Purchase
Agreement.
(xiii) "Subsequent Market" shall mean any of the New York Stock
Exchange, Inc., American Stock Exchange, Inc. or Nasdaq SmallCap Market.
(xiv) "Trading Day" means (a) a day on which the Common Stock is
traded on the Nasdaq or on the Subsequent Market on which the Common Stock
is then listed or quoted, as the case may be, or (b) if the Common Stock s
not listed on the Nasdaq or on a Subsequent Market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean a Business Day.
(xv) "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
(xvi) "Underlying Shares Registration Statement" means a
registration statement meeting the requirements set forth in the
Registration Rights Agreement dated as of the date hereof between the
Company and the original Holder hereof (the "Registration Rights
Agreement") and covering the resale of the Registrable Securities by the
selling stockholders thereunder.
