Contract
Exhibit 10.4
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH
SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE
LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS
IS AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
| Warrant No. A-1 | Number of Shares: 120,000 | |
| Series A Preferred Stock |
BuyDomains Holdings, Inc.
Effective as of February 22, 2005
Void after February 22, 2012
1. Issuance. This Preferred Stock Purchase Warrant (the “Warrant”) is issued to
Lighthouse Capital Partners V, L.P. by BuyDdomains Holdings, Inc., a Delaware corporation (hereinafter with
its successors called the “Company”).
2. Purchase Price; Number of Shares. The registered holder of this Warrant (the “Holder”),
commencing on the date hereof, is entitled upon surrender of this Warrant with the subscription
form annexed hereto duly executed, at the principal office of the Company, to purchase from the
Company, at a price per share of $10.00 (the “Purchase Price”), 120,000 fully paid and
nonassessable shares of the Company’s Series A Preferred Stock, $0.001 par value (the “Preferred
Stock”).
Until such time as this Warrant is exercised in full or expires, the Purchase Price and the
securities issuable upon exercise of this Warrant are subject to adjustment as hereinafter
provided. The person or persons in whose name or names any certificate representing shares of
Preferred Stock is issued hereunder shall be deemed to have become the holder of record of the
shares represented thereby as at the close of business on the date this Warrant is exercised with
respect to such shares, whether or not the transfer books of the Company shall be closed.
3. Payment of Purchase Price. The Purchase Price may be paid (i) in cash or by check, (ii) by
the surrender by the Holder to the Company of any promissory notes or other obligations issued by
the Company, with all such notes and obligations so surrendered being credited against the Purchase Price in an
amount equal to the
principal amount thereof plus accrued interest to the date of surrender, or (iii) by any
combination of the foregoing.
4. Net Issue Election. The Holder may elect to receive, without the payment by the Holder of
any
additional consideration, shares of Preferred Stock equal to the value of this Warrant or any
portion hereof by the
surrender of this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly
executed, at the principal office of the Company. Thereupon, the Company shall issue to the
Holder such number of
fully paid and nonassessable shares of Preferred Stock as is computed using the following
formula:
1.
X= Y(A-B)
A
A
where:
|
X | = | the number of shares of Preferred Stock to be issued to the Holder pursuant to this Section 4. | |||
| Y | = | the number of shares of Preferred Stock covered by this Warrant in respect of which the net issue election is made pursuant to this Section 4. | ||||
| A | = | the Fair Market Value (defined below) of one share of Preferred Stock, as determined at the time the net issue election is made pursuant to this Section 4. | ||||
| B | = | the Purchase Price in effect under this Warrant at the time the net issue election is made pursuant to this Section 4. |
“Fair Market Value” of a share of Preferred Stock (or fully paid and nonassessable shares
of the Company’s common stock, $0.001 par value (the “Common Stock”) if the Preferred Stock has
been automatically converted into Common Stock) as of the date that the net issue election is
made (the “Determination Date”) shall mean:
(i) If the net issue election is made in connection with and contingent upon the closing of
the sale of the Company’s Common Stock to the public in a public offering pursuant to a
Registration Statement under the 1933 Act (a “Public Offering”), and if the Company’s Registration
Statement relating to such Public Offering (“Registration Statement”) has been declared effective
by the Securities and Exchange Commission, then the initial “Price to Public” specified in the
final prospectus with respect to such offering multiplied by the number of shares of Common Stock
into which each share of Preferred Stock is then convertible.
(ii) If the net issue election is not made in connection with and contingent upon a
Public Offering, then as follows:
(a) If traded on a securities exchange or the Nasdaq National Market, the
fair market value of the Common Stock shall be deemed to be the average of the closing or last reported
sale prices of the Common Stock on such exchange or market over the five day period ending five
trading days prior to the Determination Date, and the fair market value of the Preferred Stock
shall be deemed to be such fair market value of the Common Stock multiplied by the number of
shares of Common Stock into which each share of Preferred Stock is then convertible;
(b) If otherwise traded in an over-the-counter market, the fair market value of the
Common Stock shall be deemed to be the average of the closing ask prices of the Common Stock
over the five day period ending five trading days prior to the Determination Date, and the fair market value of
the Preferred Stock shall be deemed to be such fair market value of the Common Stock multiplied by the number of
shares of Common Stock into which each share of Preferred Stock is then convertible; and
(c) If there is no public market for the Common Stock, then fair market value shall
be determined in good faith by the Company’s Board of Directors.
5. Partial Exercise. This Warrant may be exercised in part, and the Holder shall be entitled
to receive a new warrant, which shall be dated as of the date of this Warrant, covering the
number of shares in respect of which this Warrant shall not have been exercised.
6. Fractional Shares. In no event shall any fractional share of Preferred Stock be issued upon
any exercise of this Warrant. If, upon exercise of this Warrant in its entirety, the Holder would,
except as provided in
2.
this Section 6, be entitled to receive a fractional share of Preferred Stock, then the Company
shall issue the next higher number of full shares of Preferred Stock, issuing a full share with
respect to such fractional share.
7. Expiration Date; Automatic Exercise. This Warrant shall expire at the close of
business on
the earlier to occur of (i) February 22, 2012, or (ii) two years from the effective date of the
Company’s initial Public Offering, and shall be void thereafter (the “Expiration Date”). Provided
Holder has received advance written notice of at least twenty (20) days and has not earlier
exercised this Warrant, and provided this Warrant has not been assumed by the successor entity (or
parent thereof), upon the consummation of a Merger (as defined below), this Warrant shall
automatically be exercised pursuant to Section 4 hereof, without any action by Holder. “Merger”
means: (i) a sale of all or substantially all of the Company’s assets to an Unaffiliated Entity
(as defined below), or (ii) the merger, consolidation or acquisition of the Company with, into or
by an Unaffiliated Entity (other than a merger or consolidation for the principle purpose of
changing the domicile of the Company or a bona fide round of preferred stock equity financing),
that results in the transfer of fifty percent (50%) or more of the outstanding voting power of the
Company. “Unaffiliated Entity” means any entity that is owned or controlled by parties who own less
than twenty percent (20%) of the combined voting power of the voting securities of the Company
immediately prior to such merger, consolidation or acquisition. Notwithstanding the foregoing, in
the event that any outstanding warrants to purchase equity securities of the Company are assumed
by the successor entity of a Merger (or parent thereof), this Warrant shall also be similarly
assumed. The Company agrees to promptly give the Holder written notice of any proposed Merger and
written notice of termination of any proposed Merger. Notwithstanding anything to the contrary in
this Warrant, the Holder may rescind any exercise of its purchase rights after a notice of
termination of the proposed Merger if the exercise of this Warrant occurred after the Company
notified the Holder that the Merger was proposed or if the exercise was otherwise precipitated by
such proposed Merger, provided, however that such rescission right must be exercised within twenty
(20) days of receipt of such written notice of termination of the proposed Merger. In the event of
such rescission, this Warrant will continue to be exercisable on the same terms and conditions.
8. Reserved Shares; Valid Issuance. The Company covenants that it will at all
times from and after
the date hereof reserve and keep available such number of its authorized
shares of Preferred Stock and Common
Stock free from all preemptive or similar rights therein, as will be
sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable
upon such exercise. The Company further covenants that such shares as may be
issued pursuant to such exercise
and/or conversion will, upon issuance, be duly and validly issued, fully
paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
9. Stock Splits and Dividends. If after the date hereof the Company shall
subdivide the Preferred
Stock, by split-up or otherwise, or combine the Preferred Stock, or issue
additional shares of Preferred Stock in
payment of a stock dividend on the Preferred Stock, the number of shares of
Preferred Stock issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of
a subdivision or stock dividend, or
proportionately decreased in the case of a combination, and the Purchase
Price shall forthwith be proportionately
decreased in the case of a subdivision or stock dividend, or proportionately
increased in the case of a combination.
10. Adjustments for Diluting Issuances. The antidilution rights applicable to the Preferred
Stock are set forth in the Certificate of Incorporation, as amended from time to time (the “Articles”), a true and complete copy in its current form which is attached hereto as Exhibit A. The Company shall promptly
provide the Holder hereof with any restatement, amendment or modification to the Articles promptly after the same
has been made.
11. Mergers and Reclassifications. If after the date hereof the Company shall enter into any
Reorganization (as hereinafter defined), then, as a condition of such Reorganization, lawful
provisions shall be
made, and duly executed documents evidencing the same from the Company or its successor shall
be delivered to
the Holder, so that the Holder shall thereafter have the right to purchase, at a total price
not to exceed that payable
upon the exercise of this Warrant in full, the kind and amount of shares of stock and other
securities and property
receivable upon such Reorganization by a holder of the number of shares of Preferred Stock
which might have been
purchased by the Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall
be made with respect to the rights and interest of the Holder to the end that the provisions
hereof (including, without
3.
limitation, provisions for the adjustment of the Purchase Price and the number of shares issuable
hereunder and the provisions relating to the net issue election) shall thereafter be applicable
in relation to any shares of stock or other securities and property thereafter deliverable upon
exercise hereof. For the purposes of this Section 11, the term “Reorganization” shall include
without limitation any reclassification, capital reorganization or change of the Preferred Stock
(other than as a result of a subdivision, combination or stock dividend provided for in Section 9
hereof), or any consolidation of the Company with, or merger of the Company into, another
corporation or other business organization (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or change of the
outstanding Preferred Stock), or any sale or conveyance to another corporation or other business
organization of all or substantially all of the assets of the Company.
12. Certificate of Adjustment. Whenever the Purchase Price is adjusted, as herein provided,
the Company shall promptly deliver to the Holder a certificate of the Company’s chief financial
officer setting forth the Purchase Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
13. Notices of Record Date, Etc. In the event of:
(a) any taking by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any dividend or other
distribution, or any right
to subscribe for, purchase, sell or otherwise acquire or dispose of any shares of stock of
any class or any other
securities or property, or to receive any other right;
(b) any reclassification of the capital stock of the Company, capital reorganization of the
Company, consolidation or merger involving the Company, or sale or conveyance of all or
substantially all of its
assets; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of the
Company;
then in each such event the Company will provide or cause to be provided to the Holder a written
notice thereof. Such notice shall be provided at least twenty (20) days prior to the date
specified in such notice on which any such action is to be taken.
14. Representations, Warranties and Covenants. This Warrant is issued and delivered by the
Company and accepted by each Holder on the basis of the following representations, warranties
and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and deliver this Warrant and
to perform its obligations hereunder. This Warrant has been duly authorized issued, executed
and delivered by the
Company and is the valid and binding obligation of the Company, enforceable in accordance with
its terms.
(b) The shares of Preferred Stock issuable upon the exercise of this Warrant have been duly
authorized and reserved for issuance by the Company and, when issued in accordance with the
terms hereof, will be
validly issued, fully paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do not, and the issuance of the
shares of Preferred Stock upon the exercise of this Warrant in accordance with the terms
hereof will not, (i) violate
or contravene the Company’s Articles or by-laws, or any law, statute, regulation, rule,
judgment or order applicable
to the Company, (ii) violate, contravene or result in a breach or default under any contract,
agreement or instrument
to which the Company is a party or by which the Company or any of its assets are bound or
(iii) require the consent
or approval of or the filing of any notice or registration with any person or entity.
(d) As long as this Warrant is, or any shares of Preferred Stock issued upon exercise of
this Warrant or any shares of Common Stock issued upon conversion of such shares of Preferred
Stock are, issued and outstanding, the Company will provide to the Holder the copies of its
quarterly and annual financial statements, including the consolidated balance sheet and
consolidated statements of income and cash flows of the Company and
4.
its Subsidiaries as of the end of each such period, as well as a brief management summary of
such financial statements.
(e) As of the date hereof, the authorized capital stock of the Company consists of (i)
14,650,000 shares of Common Stock, of which no shares are issued and outstanding and 120,000
shares are reserved for issuance upon the exercise of this Warrant with respect to Common Stock
and the conversion of the Preferred Stock into Common Stock if this Warrant is exercised with
respect to Preferred Stock, (ii) 4,600,000 shares of Series A Preferred Stock, of which 4,310,000
are issued and outstanding shares, and (iii) 750,000 shares of Series Z Preferred Stock, all of
which are issued and outstanding shares. Attached hereto as Exhibit B is a capitalization table
summarizing the capitalization of the Company. At the request of Holder, not more man once per
calendar quarter, the Company will provide Holder with a current capitalization table indicating
changes, if any, to the number of outstanding shares of common stock and preferred stock.
15. Amendment. The terms of this Warrant may be amended, modified or waived only with the
written consent of the Holder.
16. Representations and Covenants of the Holder. This Warrant has been entered into by the
Company in reliance upon the following representations and covenants of the Holder, which by
its execution hereof
the Holder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or the Preferred Stock issuable
upon exercise of the Holder’s rights contained herein will be acquired for investment and not
with a view to the sale or distribution of any part thereof, and the Holder has no present
intention of selling or engaging in any public distribution of the same except pursuant to a
registration or exemption.
(b) Accredited Investor. Holder is an “accredited investor” within the meaning of Rule 501
of Regulation D under the Securities Act of 1933, as amended.
(c) Private Issue. The Holder understands (i) that the Preferred Stock issuable upon
exercise of the Holder’s rights contained herein is not registered under the 1933 Act or
qualified under applicable
state securities laws on the ground that the issuance contemplated by this Warrant will be
exempt from the
registration and qualifications requirements thereof, and (ii) that the Company’s reliance on
such exemption is
predicated on the representations set forth in this Section 16.
(d) Financial Risk. The Holder has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its investment and
has the ability to bear the
economic risks of its investment.
17. Notices, Transfers, Etc.
(a) Any notice or written communication required or permitted to be given to the Holder may
be given by certified mail or delivered to the Holder at the address most recently provided by
the Holder to the
Company.
(b) Subject to compliance with applicable federal and state securities laws, this Warrant may
be transferred by the Holder with respect to any or all of the shares purchasable hereunder.
Upon surrender of this
Warrant to the Company, together with the assignment notice annexed hereto duly executed, for
transfer of this
Warrant as an entirety by the Holder, the Company shall issue a new warrant of the same
denomination to the
assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed,
by the Holder for transfer with respect to a portion of the shares of Preferred Stock
purchasable hereunder, the
Company shall issue a new warrant to the assignee, in such denomination as shall be requested
by the Holder hereof,
and shall issue to such Holder a new warrant covering the number of shares in respect of which
this Warrant shall
not have been transferred.
5.
(c) In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall
issue a new warrant of like tenor and denomination and deliver the same (i) in exchange and
substitution for and upon surrender and cancellation of any mutilated Warrant, or (ii) in lien
of any Warrant lost, stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or destruction of such
Warrant
18. Governing Law. The provisions and terms of this Warrant shall be governed by and construed
in accordance with the internal laws of the State of California without giving effect to its
principles regarding conflicts of laws.
19. Successors and Assigns. This Warrant shall be binding upon the Company’s successors and
assigns and shall inure to the benefit of the Holder’s successors, legal representatives and
permitted assigns.
20. Business Days. If the last or appointed day for the taking of any action required or the
expiration
of any rights granted herein shall be a Saturday or Sunday or a legal holiday in California,
then such action may be
taken or right may be exercised on the next succeeding day which is not a Saturday or Sunday
or such a legal
holiday.
21. Qualifying Public Offering. If the Company shall effect a firm commitment underwritten
public offering of shares of Common Stock which results in the conversion of the Preferred Stock into
Common Stock pursuant to the Company’s Articles in effect immediately prior to such offering, then,
effective upon such conversion, this Warrant shall change from the right to purchase shares of Preferred Stock to
the right to purchase shares of Common Stock, and the Holder shall thereupon have the right to purchase, at a total
price equal to that payable upon the exercise of this Warrant in full, the number of shares of Common Stock which
would have been receivable by the Holder upon the exercise of this Warrant for shares of Preferred Stock
immediately prior to such conversion of such shares of Preferred Stock into shares of Common Stock, and in such event
appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the
provisions hereof (including, without limitation, the provisions for the adjustment of the Purchase Price and of the number
of shares purchasable upon exercise of this Warrant and the provisions relating to the net issue election) shall
thereafter be applicable to any shares of Common Stock deliverable upon the exercise hereof.
22. Value. The Company and the Holder agree that the value of this Warrant on the date
of grant is $100.
| BuyDomains Holdings, Inc. | ||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||
| Name: | ||||||
| Title: | President & Assistant Secretary | |||||
6.
Subscription
To: |
||||
Date: |
||||
The undersigned hereby subscribes for shares of Preferred Stock covered by this Warrant. The
certificate(s) for such shares shall be issued in the name of the undersigned or as otherwise
indicated below:
Net Issue Election Notice
| To: | Date: |
The undersigned hereby elects under Section 4 to surrender the right to purchase shares of
Preferred Stock pursuant to this Warrant. The certificate(s) for such shares issuable upon such net
issue election shall be issued in the name of the undersigned or as otherwise indicated below:
Assignment
For value received hereby sells, assigns and transfers unto
[Please print or typewrite name and address of Assignee]
Dated: |
||||
| Signature | ||||
| Name for Registration | ||||
| In the Presence of: | ||||
Exhibit A
See Certificate of Incorporation
Exhibit B
Capitalization of BuyDomains Holdings, Inc.
| Name | Common Stock | Series A Preferred | Series Z Preferred | |||
HIGHLAND CAPITAL
PARTNERS VI
LIMITED
PARTNERSHIP |
1,618,836 | |||||
HIGHLAND CAPITAL
PARTNERS VI-B
LIMITED
PARTNERSHIP |
886,998 | |||||
HIGHLAND
ENTREPRENEURS’
FUND VI LIMITED
PARTNERSHIP |
80,166 | |||||
SUMMIT INVESTORS
VI, L.P. |
19,613 | |||||
SUMMIT VI ADVISORS FUND, L.P. |
24,117 | |||||
SUMMIT VI ENTREPRENEURS FUND, L.P. |
37,028 | |||||
SUMMIT VENTURES VI-A, L.P. |
1,159,630 | |||||
SUMMIT VENTURES VI-B, L.P. |
483,612 | |||||
XXXXXXXXXXX.XXX, LLC |
750,000 |
