EXHIBIT 4.10
WARRANT AGREEMENT
TO PURCHASE COMMON STOCK OF
XXXXXXX.XXX
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY INVESTOR FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
This Warrant Agreement (the "Agreement") is entered into as of January 9,
2002 (the "Effective Date"), by and between Xxxxxxx.xxx (the "Company") and Xx.
Xxxxxx X. Xxxxxxxx, Xx. ("Holder"). For good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Issuance of Warrants. The Company subject to the terms and conditions
--------------------
hereinafter set forth, hereby issues warrants (the "Warrants") to purchase One
Million (1,000,000) shares of the Company's Common Stock (the "Warrant Shares").
The exercise price (the "Exercise Price") of the Warrant Shares shall be twenty
cents ($0.20) per share subject to adjustment in accordance with Paragraph 5 of
this Agreement.
2. Term. The Warrants may be exercised at any time after the Effective Date
----
of the Merger, as defined in the Merger Agreement between the Company, RAE
Systems Inc. and RAES Acquisition Corporation (the "Merger Agreement") and
before the expiration of ten (10) years (the "Expiration Date"). If the Merger
does not close, this Warrant shall be null and void.
3. Exercise.
--------
(a) Holder shall exercise the Warrants granted hereunder, in whole or
in part, by delivering to the Company at the office of the Company or at such
other address as the Company may designate by notice in writing to the Holder,
the notice of Exercise attached hereto as Exhibit A and incorporated herein by
---------
reference and a check or wire transfer in lawful money of the United States for
the Exercise Price.
(b) Upon delivery of the items set forth in (a) above, Holder shall be
entitled to receive a certificate or certificates representing the Warrant
Shares. Such Warrant Shares shall be validly issued, fully paid and
non-assessable.
(c) Warrants shall be deemed to have been exercised immediately prior
to the close of business on the day of such delivery, and Holder shall be deemed
the holder of record of the Warrant Shares issuable upon such exercise at such
time. The Warrants may be exercised in whole or in part and from time to time
as the holder may determine.
(d) Upon any partial exercise, at the request of the Company, this
Agreement shall be surrendered and a new Warrant Agreement evidencing the right
to purchase the number of Warrant Shares not purchased upon such exercise shall
be issued to Holder.
(e) Net Issue Exercise.
(i) In lieu of exercising this Warrant in the manner provided
above in Section 3(a), Holder may elect to receive Warrant Shares equal to the
value of this Warrant (or the portion thereof being canceled) by surrender of
this Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to Holder a number of shares of
Warrant Shares computed using the following formula:
X = Y (A - B)
---------
A
Where X is the number of Warrant Shares to be issued to Holder. Y is The number
of Warrant Shares purchasable under this Warrant (at the date of such
calculation). A is the fair market value of one Share (at the date of such
calculation). B is the Exercise Price (as adjusted to the date of such
calculation).
(ii) For purposes of this Section 3(e), the fair market value of
Warrant Shares on the date of calculation shall mean with respect to each share
of the Warrant Shares:
(A) if shares of Common Stock are traded on a national
securities exchange (an "EXCHANGE"), the closing price of a share of the Common
Stock of the Company as reported in The Wall Street Journal, or
(B) if shares of Common Stock are not traded on an Exchange
but trade in the Over-the-Counter Bulletin Board, the closing price of a share
of the Common Stock of the Company as reported by Bloomberg Financial markets or
an equivalent reliable reporting service, or
(C) if (A) and (B) are not applicable, the fair market value
of a Share shall be at the highest price per share which the Company could
obtain on the date of calculation from a willing buyer for Warrant Shares sold
by the Company, fom authorized but unissued Warrant Shares, as determined in
good faith by the Board of Directors, unless the Company is at such time
involved in any consolidation or merger of the Company with or into another
entity, the sale or transfer of all or substantially all of the assets of the
Company or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, in which case the fair market
value of Warrant Shares shall be deemed to be the value received by the holders
of such stock pursuant to such acquisition.
(D) Notwithstanding anything to the contrary contained
herein, fifty percent (50%) of any and all exercises of the Warrants shall be
2
paid in cash in accordance with Section 3(a) and not net exercised under this
Section 3(e).
4. Registration Rights. The shares underlying the Warrants shall be
-------------------
registered by the Company on Form S-8 or, if Form S-8 is not applicable, on such
other Form as shall be appropriate. The Company shall use its commercially
reasonable efforts to cause the registration statement to remain effective until
the earlier of: (i) shares underlying the Warrants have been sold; or (ii) the
date on which the shares underlying the Warrants may be sold to the public
without registration or restriction (including, without limitation, restrictions
as to volume).
5. Representations and Warranties of Holder. The Holder hereby represents
-------------------------------------------
and warrants to the Company as follows:
(a) Investment Intent. Holder is purchasing the Warrant Shares solely
for its own account for investment. Holder has no present intention to resell or
distribute the Warrants or the Warrant Shares or any portion thereof, except in
connection with a distribution to its partners.
(b) Economic Risk. Holder realizes that the purchase of the Warrants
and the Warrant Shares will be a highly speculative investment and involves a
high degree of risk.
6. Adjustments. The Warrants granted hereunder and the Exercise Price
-----------
thereof shall be subject to adjustment from time to time upon the happening of
certain events as set forth below.
(a) Stock Splits and Dividends. If outstanding shares of Nettaxi
Common Stock shall be subdivided into a greater number of shares or a dividend
in Common Stock shall be paid in respect of Common Stock, the Exercise Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Exercise Price, the number of Shares purchasable upon the exercise of the
Warrants shall be changed to the number determined by dividing (i) an amount
equal to the number of Shares issuable upon the exercise of the Warrants
immediately prior to such adjustment, multiplied by the Exercise Price in effect
immediately prior to such adjustment, by (ii) the Exercise Price in effect
immediately after such adjustment. The number of Shares purchasable upon the
exercise of the Warrants and the Exercise Price of the Warrants shall be
appropriately adjusted for the reverse stock split as contemplated by the Merger
Agreement.
(b) Reclassification or Merger. In case of any reclassification,
change or conversion of securities in the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, unless this
Warrant shall have been exercised or terminated in accordance with its terms,
the Holder of this Warrant shall have the right to exercise this Warrant and
upon such exercise to receive, in lieu of each share of Common Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
3
other securities, money and property receivable upon such reclassification,
change or merger by a holder of one share of Common Stock. The provisions of
this subparagraph shall similarly apply to successive reclassifications,
changes, mergers and transfers.
(c) Adjustment Certificate. When any adjustment is required to be made
in the Shares or the Exercise Price pursuant to this Section, Nettaxi shall
promptly mail to Holder a certificate setting forth (i) a brief statement of the
facts requiring such adjustment, (ii) the Exercise Price after such adjustment
and (iii) the kind and amount of stock or other securities or property into
which the Warrants shall be exercisable after such adjustment.
7. Reservation of Shares. The Company shall at all times keep reserved a
---------------------
sufficient number of authorized shares of Common Stock, and shall make
appropriate provision of their issuance, to provide for the exercise of the
Warrants in full.
8. Transferability. The Warrants issued hereunder and any and all Shares
---------------
issued upon exercise of the Warrants shall be transferable on the books of the
Company by the holder hereof in person or by duly authorized attorney subject to
any restrictions imposed by applicable federal or state securities laws. It
shall be a further condition to any transfer of the Warrants that the transferor
(if any portion of the Warrants are retained) and the transferee shall receive
and accept new Warrants, of like tenor and date, executed by the Company for the
portion so transferred and for any portion retained, and shall surrender this
Agreement executed.
9. Voting. Nothing contained in this Agreement shall be construed as
------
conferring upon Holder the right to vote or to receive dividends or to consent
or receive notice as a shareholder in respect to any meeting of shareholders for
the election of directors of or for any other purpose not specified herein.
10. Miscellaneous.
-------------
(a) Amendment. This Agreement may be amended by written agreement
between the Company and Holder.
(b) Notice. Any notice, demand or request required or permitted to be
given under this Agreement will be in writing and will be deemed sufficient when
delivered personally or sent by telegram or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, or with a
commercial courier service, with postage prepaid, and addressed, if to the
Company, at its principal place of business, attention the President, and if to
Holder, at Holder's address as shown on the signature page hereto.
(c) Further Assurances. Both parties agree to execute any
additional documents necessary to carry out the purposes of this Agreement.
(d) Severability. If any provision of this Agreement is held by any
court of competent jurisdiction to be illegal, unenforceable or void, such
provision will be enforced to the greatest extent possible and all other
provisions of this Agreement will continue in full force and effect.
4
(e) Governing Law. This Agreement will be interpreted and enforced in
accordance with California Law as applied to agreements made and performed in
California.
(f) Survival. The representations and warranties, of the Company set
forth in this Agreement shall survive the closing and consummation of the
transactions contemplated hereby for a period of ten (10) years from the date
hereof.
(g) Entire Agreement; Successors and Assigns. This Agreement and the
documents and instruments attached hereto constitute the entire agreement
between Holder and the Company relative to the subject matter hereof. Any
previous agreements between the parties are superseded by this Agreement.
Subject to any exceptions specifically set forth in this Agreement, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective executors, administrators, heirs, successors and assigns of
the parties.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) Headings. The headings of the Paragraphs of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
(j) Attorney Fees. If any action is brought to interpret or enforce
the terms of this Agreement, the prevailing party in such action shall be
entitled to recover its attorneys fees and costs incurred in connection with
such action.
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and delivered by their duly authorized officers.
THE COMPANY: XXXXXXX.XXX
By: /s/ Xxxx Xxxxxxxx
-------------------
President
HOLDER: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Xxxxxx X. Xxxxxxxx
Address:________________
________________________
6
