1
EXHIBIT 10.4
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
30,000 Shares
WARRANT TO PURCHASE COMMON STOCK
OF
ALYDAAR SOFTWARE CORPORATION
THIS CERTIFIES that XXXXXXXX CAPITAL MANAGEMENT, INC. or any
subsequent holder hereof (the "Holder"), has the right to purchase from Alydaar
Software Corporation, a North Carolina corporation (the "Company"), up to
THIRTY THOUSAND (30,000) fully paid and nonassessable shares of the Company's
Common Stock, par value $.001 per share (the "Common Stock"), subject to
adjustment as provided herein, at a price equal to the Exercise Price (as
defined below), at any time beginning on the date on which this Warrant is
issued (the "Issue Date") and ending at 5:00 p.m., eastern time, on the date
that is the fifth anniversary of the Issue Date (the "Expiration Date"). This
Warrant is issued, and all rights hereunder shall be, subject to all of the
conditions, limitations and provisions set forth herein and in the Securities
Purchase Agreement of even date herewith by and among the Company and the
Purchaser named therein (the "Securities Purchase Agreement").
1. Exercise.
(a) Right to Exercise; Exercise Price. The Holder shall have the
right to exercise this
2
Warrant at any time and from time to time up to and including the Expiration
Date as to all or any part of the shares of Common Stock covered hereby (the
"Warrant Shares"). The "Exercise Price" payable by the Holder in connection
with the exercise of this Warrant shall be equal to 140% of the average Closing
Bid Price for the Common Stock on the ten Trading Days occurring immediately
prior to, but not including, March 5, 1999 (subject to adjustment as specified
in paragraph 6 hereof).
(b) Exercise Notice. In order to exercise this Warrant, the
Holder shall send by facsimile transmission, at any time prior to 7:00 p.m.,
eastern time, on the date on which the Holder wishes to effect such exercise
(the "Exercise Date"), to the Company and to its designated transfer agent for
the Common Stock (the "Transfer Agent") a copy of the notice of exercise in the
form attached hereto as Exhibit A (the "Exercise Notice") stating the number of
Warrant Shares as to which such exercise applies and the calculation therefor.
The Holder shall thereafter deliver to the Company the original Exercise
Notice, the original Warrant and the Exercise Price. In the case of a dispute
as to the calculation of the Exercise Price or the number of Warrant Shares
issuable hereunder, the Company shall promptly issue to the Holder the number
of Warrant Shares that are not disputed and shall submit the disputed
calculations to the Company's independent accountant within two (2) business
days following the Exercise Date. The Company shall cause such accountant to
calculate the Exercise Price and/or the number of Warrant Shares issuable
hereunder and to notify the Company and the Holder of the results in writing no
later than two business days following the day on which such accountant
received the disputed calculations. Such accountant's calculation shall be
deemed conclusive absent manifest error. The fees of any such accountant shall
be borne by the party whose calculations were most at variance with those of
such accountant.
(c) Cancellation of Warrant. This Warrant shall be canceled upon
its exercise and, if this Warrant is exercised in part, the Company shall, at
the time that it delivers Warrant Shares to the Holder pursuant to such
exercise as provided herein, issue a new warrant, and deliver to the Holder a
certificate representing such new warrant, with terms identical in all respects
to this Warrant (except that such new warrant shall be exercisable into the
number of shares of Common Stock with respect to which this Warrant shall
remain unexercised); provided, however, that the Holder shall be entitled to
exercise all or any portion of such new warrant at any time following the time
at which this Warrant is exercised, regardless of whether the Company has
actually issued such new warrant or delivered to the Holder a certificate
therefor.
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a
Exercise Notice pursuant to paragraph 1 above, the Company shall, (A) in the
case of a Cashless Exercise (as defined below), no later than the close of
business on the third (3rd) business day following the Exercise Date set forth
in such Exercise Notice, (B) in the case of a Cash Exercise (as defined below)
no later than the close of business on the later to occur of (i) the third
(3rd) business day following the Exercise Date set forth in such Exercise
Notice and (ii) such later date on which the Company shall have received
payment of the Exercise Price, and (C) with respect to Warrant Shares which are
disputed as described in paragraph 1(b) above, and required to be delivered by
the Company pursuant to the accountant's calculations described
-2-
3
therein, the date for delivery thereof specified in such paragraph 1(b) (the
"Delivery Date"), issue and deliver or caused to be delivered to the Holder the
number of Warrant Shares as shall be determined as provided herein. Warrant
Shares delivered to the Holder shall not contain any restrictive legend as long
as the sale of such Warrant Shares is covered by an effective Registration
Statement (as defined in the Registration Rights Agreement), has been made
pursuant to Rule 144 under the Securities Act of 1933, as amended, or may be
made pursuant to Rule 144(k) under the Securities Act of 1933, as amended, or
any successor rule or provision.
3. Failure to Deliver Warrant Shares.
(a) Exercise Default. In the event that the Company fails
for any reason as a result of any willful action or any willful failure to act
on the part of the Corporation (other than by operation of paragraph 4 below) to
deliver to a Holder certificates representing the number of Warrant Shares
specified in the applicable Exercise Notice on or before the Delivery Date
therefor and such failure continues for ten (10) Business Days following the
delivery of written notice thereof from the Holder (an "Exercise Default"), the
Company shall pay to the Holder payments ("Exercise Default Payments") in the
amount of (i) (N/365) multiplied by (ii) the aggregate Exercise Price for the
Warrant Shares which are the subject of such Exercise Default multiplied by
(iii) the lower of ten percent (10%) and the maximum rate permitted by
applicable law, where "N" equals the number of days elapsed between the
original Delivery Date for such Warrant Shares and the date on which all of
such Warrant Shares are issued and delivered to the Holder. Amounts payable
under this subparagraph 3(a) shall be paid to the Holder in immediately
available funds on or before the fifth (5th) business day of the calendar month
immediately following the calendar month in which such amount has accrued.
(b) Buy-in. Nothing herein shall limit a Holder's right
to pursue actual damages for the Company's failure to issue and deliver Warrant
Shares in connection with an exercise on the applicable Delivery Date
(including, without limitation, damages relating to any purchase of shares of
Common Stock by the Holder to make delivery on a sale effected in anticipation
of receiving Warrant Shares upon exercise, such damages to be in an amount
equal to (A) the aggregate amount paid by the Holder for the shares of Common
Stock so purchased minus (B) the aggregate amount of net proceeds, if any,
received by the Holder from the sale of the Warrant Shares issued by the
Company pursuant to such exercise), 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). Any
award of damages hereunder shall take into account any reduction in the
Exercise Price effected pursuant to paragraph (c) below.
(c) Reduction of Exercise Price. In the event that a
Holder has not received certificates representing the Warrant Shares by the
tenth (10th) business day following an Exercise Default, the Holder may, upon
written notice to the Company, regain on such business day the rights of a
Holder of this Warrant, or part thereof, with respect to the Warrant Shares
that are the subject of such Exercise Default, and the Exercise Price for such
Warrant Shares shall be reduced by one percent (1%)
-3-
4
for each day beyond such 10th business day in which the Exercise Default
continues. In such event, the Holder shall retain all of the Holder's rights
and remedies with respect to the Company's failure to deliver such Warrant
Shares (including without limitation the right to receive the cash payments
specified in subparagraph 3(a) above).
(d) Holder of Record. Each Holder shall, for all
purposes, be deemed to have become the holder of record of Warrant Shares on
the Exercise Date of this Warrant, irrespective of the date of delivery of such
Warrant Shares. Nothing in this Warrant shall be construed as conferring upon
the Holder hereof any rights as a stockholder of the Company prior to the
Exercise Date.
4. Exercise Limitations.
In no event shall a Holder be permitted to exercise this Warrant, or
part thereof, with respect to Warrant Shares in excess of the number of such
shares, upon the issuance of which, (x) the number of shares of Common Stock
beneficially owned by the Holder plus (y) the number of shares of Common Stock
issuable upon such exercise, would be equal to or exceed (z) 4.99% of the
number of shares of Common Stock then issued and outstanding. To the extent
that the limitation contained in this paragraph 4 applies, the determination of
whether this Warrant is exercisable (in relation to other securities owned by a
Holder) shall be in the sole discretion of the Holder, and the submission of an
Exercise Notice shall be deemed to be the Holder's determination that this
Warrant is exercisable pursuant to the terms hereof, and the Company shall have
no obligation whatsoever to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to restrict the right
of a Holder to exercise this Warrant, or part thereof, at such time as such
exercise will not violate the provisions of this Section 4.
5. Payment of the Exercise Price. The Holder may pay the
Exercise Price in either of the following forms or, at the election of Holder,
a combination thereof:
(a) Cash Exercise: by delivery of immediately available funds.
(b) Cashless Exercise: by surrender of 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 x (A-B)/A
where: X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
-4-
5
A = the average of the Closing Bid Prices of the
Common Stock for the five (5) Trading Days
immediately prior to (but not including) the
Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 under the Securities Act of 1933, as amended, 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.
6. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then the Holder hereof, upon
exercise of this Warrant after the record date for the determination of Holders
of Common Stock entitled to receive such dividend, shall be entitled to
receive, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as the Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Stock Split, Recapitalization or Reclassification. If the
Company shall at any time effect a stock split, recapitalization,
reclassification or other similar transaction of such character that the shares
of Common Stock shall be changed into or become exchangeable for a larger or
smaller number of shares, then upon the effective date thereof, the number of
shares of Common Stock which the Holder hereof shall be entitled to purchase
upon exercise of this Warrant shall be increased or decreased, as the case may
be, in direct proportion to the increase or decrease in the number of shares of
Common Stock by reason of such stock split, recapitalization, reclassification
or similar transaction, and the Exercise Price shall be, in the case of an
increase in the number of shares, proportionally decreased and, in the case of
decrease in the number of shares, proportionally increased. The Company shall
give the Warrant Holder the same notice at the same time it provides such
notice to holders of Common Stock of any transaction described in this Section
6(b).
(c) Distributions. If the Company shall at any time distribute to
holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned
surplus or net profits for the current or the immediately preceding year) then,
in any such case, the Holder of this Warrant shall be entitled to receive, upon
exercise of this Warrant, with respect to each share of Common Stock issuable
upon such exercise, the amount of cash or evidences of indebtedness or other
securities or assets which the Holder would have been entitled to receive with
respect to each such share of Common Stock as a result of the happening of such
event had this Warrant been exercised immediately prior to the record date or
other date fixing shareholders to be affected by such event (the "Determination
Date") or, in lieu thereof, if the Board of Directors of the Company
-5-
6
should so determine prior to the Determination Date, a reduced Exercise Price
determined by multiplying the Exercise Price on the Determination Date by a
fraction, the numerator of which is the difference between (x) such Exercise
Price and (y) the value of such distribution applicable to one share of Common
Stock (such value to be determined by an investment bank selected by the Holder
and reasonably acceptable to the Company), and the denominator of which is such
Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a
result of which shares of Common Stock of the Company shall be changed into the
same or a different number of shares of the same or another class or classes of
stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exercisable into such class and type of
securities or other assets as the Holder would have received had the Holder
exercised this Warrant immediately prior to such Corporate Change; provided,
however, that Company may not effect any Corporate Change unless (i) it first
shall have given twenty (20) business days' notice to the Holder hereof of any
Corporate Change and makes a public announcement of such event at the same time
that it gives such notice (it being understood that the filing by the Company
of a Form 8-K for the purpose of disclosing the anticipated consummation of the
Corporate Change shall constitute such a notice for purposes of this provision)
and (ii) it requires the resulting successor or acquiring entity (if not the
Company) to assume by written instrument the obligations of the Company
hereunder and under the Securities Purchase Agreement and the Registration
Rights Agreement.
(e) Exercise Price as Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in paragraph
1 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this paragraph 6, and thereafter shall mean said price as
adjusted from time to time in accordance with the provisions of each such
subsection. No such adjustment under this paragraph 6 shall be made unless such
adjustment would change the Exercise Price at the time by two percent (2%) or
more; provided, however, that all adjustments not so made shall be deferred and
made when the aggregate thereof would change the Exercise Price at the time by
2% or more. No adjustment made pursuant to any provision of this paragraph 6
shall have the effect of increasing the total consideration payable upon
exercise of this Warrant in respect of all the Common Stock as to which this
Warrant may be exercised.
(f) Adjustments; Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
paragraph 6, the Holder of this Warrant shall, upon exercise of this Warrant,
become entitled to receive securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets
shall be subject to adjustment from time to time in a manner and upon terms as
nearly equivalent as practicable to the provisions of this paragraph 6.
-6-
7
7. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the exercise of this Warrant, but on exercise of this
Warrant, the Holder hereof may purchase only a whole number of shares of Common
Stock. If, on exercise of this Warrant, the Holder hereof would be entitled to
a fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon exercise shall be rounded up or down to
the nearest whole number of shares of Common Stock.
8. Transfer of this Warrant. The Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part (and
if in part, in minimum denominations of 5,000 shares), as long as such sale or
other disposition is made pursuant to pursuant to an effective registration
statement or an exemption to the registration requirements of the Securities
Act of 1933, as amended, and applicable state laws. Upon such transfer or other
disposition, the Holder shall deliver a written notice to Company,
substantially in the form of the Transfer Notice attached hereto as Exhibit B
(the "Transfer Notice"), indicating the person or persons to whom this Warrant
shall be transferred and, if less than all of this Warrant is transferred or
this Warrant is transferred in parts, the number of Warrant Shares to be
covered by the part of this Warrant to be transferred to each such person.
Within three (3) business days of receiving a Transfer Notice and the original
of this Warrant, the Company shall deliver to the each transferee designated by
the Holder a Warrant or Warrants of like tenor and terms for the appropriate
number of Warrant Shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Holder of this Warrant any legal or equitable right,
remedy or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Holder of this Warrant.
10. Loss, theft, destruction or mutilation of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
11. Notice or Demands.
Except as otherwise provided herein, any notice, demand or
request required or permitted to be given pursuant to the terms of this Warrant
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a business day or, if such day is not a business
day, on the next succeeding
-7-
8
business day, (ii) on the next business day after timely delivery to a
nationally-recognized overnight courier and (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid), addressed as follows:
If to the Company:
Alydaar Software Corporation
0000 Xxxxxxx Xxxx
Xxxxx 000 X.
Xxxxxxxxx, XX 00000
Attn: J. Xxxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
McGuire, Woods, Battle & Xxxxxx LLP
Bank of America Corporate Center
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to the Holder, to such address as shall be designated by the Holder in
writing to the Company.
12. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of North
Carolina, without giving effect to conflict of law provisions thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
9
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
March, 5 1999.
ALYDAAR SOFTWARE CORPORATION
By: /s/ XXXXXX X. XXXXXX
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: CEO
-9-
10
EXHIBIT A to WARRANT
EXERCISE NOTICE
The undersigned Holder hereby irrevocably exercises the right to
purchase of the shares of Common Stock ("Warrant Shares") of Alydaar Software
Corporation, a North Carolina corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of
the Exercise Price shall be made as:
______ a Cash Exercise with respect to ________________ Warrant Shares; and/or
______ a Cashless Exercise with respect to _________________ Warrant Shares.
2. Payment of Exercise Price. In the event that the Holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the Holder shall pay the sum of $________________ to
the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the
Holder _____________ Warrant Shares in accordance with the terms of the
Warrant.
Date:
----------------------
-----------------------------------
Name of Registered Holder
By:
-------------------------------
Name:
Title:
-10-
11
EXHIBIT B to WARRANT
TRANSFER NOTICE
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers unto the person or persons named below the right
to purchase________shares of the Common Stock of Alydaar Software Corporation
evidenced by the attached Warrant.
Date:
----------------------
-----------------------------------
Name of Registered Holder
By:
---------------------------------
Name:
Title:
Transferee Name and Address:
------------------------------------------
------------------------------------------
------------------------------------------
-11-
