NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS 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, 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, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
COMMON STOCK PURCHASE WARRANT
To Purchase up to 100,000 Shares of Common Stock of
Arkona, Inc.
Warrant No. 2006A-1
1. Basic Terms. THIS COMMON STOCK PURCHASE WARRANT CERTIFIES
that, for value received, Coffin Partners LLC (the "Holder"), is entitled, upon
the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time after vesting and prior to the close of
business on the applicable expiration date set forth in Section 2 below (the
"Termination Date") but not thereafter, to subscribe for and purchase from
Arkona, Inc., a Delaware corporation (the "Company"), up to One Hundred Thousand
(100,000) shares (the "Warrant Shares") of Common Stock, subject to adjustment
hereunder, of the Company (the "Common Stock"). The purchase price of one share
of Common Stock (the "Exercise Price") under this Warrant shall be $0.68,
subject to adjustment hereunder.
2. Vesting Schedule. Holder may exercise its rights hereunder
in accordance with the following vesting schedule:
(a) Time-Based Vesting. Fifty Thousand (50,000) of
the Warrant Shares (the "Time Vesting Shares") shall first become exercisable as
follows:
(i) the right to purchase 14,000 Time
Vesting Shares shall vest as of the
date of this Warrant; and
(ii) the right to purchase 4,000 Time
Vesting Shares shall vest on September 1, 2006 and the first day of each month
thereafter until the right to purchase all 50,000 of the Time Vesting Shares has
vested.
The Termination Date with respect to the Time Vesting Shares shall be August 14,
2008. The Time Vesting Shares shall continue to vest and remain exercisable,
whether or not the Holder continues to provide services to the Company.
(b) Performance-Based Vesting. The remaining Fifty
Thousand (50,000) Warrant Shares (the "Performance Vesting Shares") other than
the Time Vesting Shares shall first become exercisable as follows:
(i) the right to purchase 12,500 Performance
Vesting Shares shall vest on September 1, 2006 if the closing price per share of
Common Stock as reported by the primary United States market on which the Common
Stock is quoted or traded (the "Closing Price") is $1.00 or greater for at least
20 Trading Days (as defined below) during the calendar quarter ending on such
date;
(ii) provided that Xxxxxx's consulting
relationship with the Company continued past October 1, 2006, the right to
purchase 12,500 Performance Vesting Shares shall vest on December 31, 2006 if
the Closing Price is $1.00 or greater for at least 20 Trading Days (as defined
below) during the calendar quarter ending on such date;
(iii) provided that Xxxxxx's consulting
relationship with the Company continued past January 1, 2007, the right to
purchase 12,500 Performance Vesting Shares shall vest on March 31, 2007 if the
Closing Price is $1.00 or greater for at least 20 Trading Days (as defined
below) during the calendar quarter ending such date; and
(iv) provided that Xxxxxx's consulting
relationship with the Company continued past April 1, 2007, the right to
purchase 12,500 Performance Vesting Shares shall vest on June 30, 2007 if the
Closing Price is $1.00 or greater for at least 20 Trading Days (as defined
below) during the calendar quarter ending on such date;
The Termination Date with respect the Performance Vesting Shares shall be May
31, 2009; provided, however, that the right to purchase any Performance Vesting
Share shall terminate as of the date it becomes impossible for such Performance
Vesting Share to vest.
3. Authorization of Warrant Shares. The Company represents and
warrants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue or income taxes, if any, payable by the
Holder).
4. Representations and Warranties by the Holder. The Holder
represents and warrants to the Company as follows:
(a) This Warrant and the Warrant Shares issuable upon
exercise thereof are being acquired for its own account, for investment and not
with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act of 1933, as amended
(the "Act"). Upon exercise of this Warrant, the Holder shall, if so requested by
the Company, confirm in writing, in a form satisfactory to the Company, that the
securities issuable upon exercise of this Warrant are being acquired for
investment and not with a view toward distribution or resale.
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(b) The Holder understands that the Warrant and the
Warrant Shares have not been registered under the Act by reason of their
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Act pursuant to Section 4(2) thereof and/or Regulation D
promulgated thereunder, and that they must be held by the Holder indefinitely,
and that the Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration.
(c) The Holder has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the purchase of this Warrant and the Warrant Shares purchasable
pursuant to the terms of this Warrant and of protecting its interests in
connection therewith.
(d) The Holder is able to bear the economic risk of
the purchase of the Warrant Shares pursuant to the terms of this Warrant. (e)
The Holder is an "accredited investor" as such term is defined in Rule 501 of
Regulation D promulgated under the Act.
5. Restrictive Legend.
-------------------
The Warrant Shares (unless registered under the Act) shall be
stamped or imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT 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, 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,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
6. Exercise of Warrant.
--------------------
(a) Exercise of the purchase rights represented by
this Warrant may be made at any time or times on or before the Termination Date
by delivery to the Company of a duly executed original or facsimile copy of the
Notice of Exercise Form attached hereto as Exhibit A (or such other office or
agency of the Company as the Company may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books of the
Company) together with payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer to an account designated by the Company or
cashier's check drawn on a United States bank; provided, however, that within 3
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Trading Days after the date such Notice of Exercise is delivered to the Company,
the Holder shall surrender this Warrant to the Company. For the purposes of this
Warrant, "Trading Day" shall mean a day on which the principal United States
market on which the Company's securities are traded is open for trading.
Certificates for shares purchased hereunder shall be delivered to the Holder
within 7 Trading Days after the date on which the Notice of Exercise shall have
been delivered by original or facsimile copy and payment of the aggregate
Exercise Price shall have been received by the Company as set forth above
("Warrant Share Delivery Date"); provided, however, that in the event the
Warrant is not surrendered by the Holder and received by the Company within 3
Trading Days after the date on which the aggregate Exercise Price shall have
been paid and the Notice of Exercise shall be delivered by facsimile copy, the
Warrant Share Delivery Date shall be extended to the extent such 3 Trading Day
period is exceeded. This Warrant shall be deemed to have been exercised on the
date the Notice of Exercise is delivered to the Company and the aggregate
Exercise Price shall have been paid. The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 9 prior to the issuance of such shares, have been
paid.
(b) If this Warrant shall have been exercised in
part, the Company shall promptly deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.
7. Net Exercise. In lieu of cash exercising this Warrant, the
holder of this Warrant may elect to receive 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 the holder hereof a number of Shares
computed using the following formula:
Y (A - B)
---------
X = A
Where
X -- The number of Warrant Shares to be issued to the holder of this
Warrant.
Y -- The number of Warrant Shares purchasable under this Warrant.
A -- The fair market value of one Warrant Share.
B -- The Exercise Price (as adjusted to the date of such calculations).
For purposes of this Section 7, the fair market value of a Warrant Share shall
mean the average of the closing bid and asked prices of the Company's common
stock quoted in the over-the-counter market in which such stock is traded or the
closing price quoted on any exchange on which such stock is listed, whichever is
applicable, as published in the Western Edition of The Wall Street Journal for
the ten (10) trading days prior to the date of determination of fair market
value (or such shorter period of time during which such stock was traded
over-the-counter or on such exchange). If the common stock is not traded on the
over-the-counter market or on an exchange, the fair market value shall be the
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price per share that the Company could obtain from a willing buyer for the
shares of common stock sold by the Company from authorized but unissued shares,
as such prices shall be determined in good faith by the Company's Board of
Directors.
8. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the difference between the
fair market value of such fractional share as of the date of exercise and the
Exercise Price of such fractional share.
9. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto and an opinion of counsel
in form and substance reasonably satisfactory to the Company that the issuance
to a person other than the Holder is permitted by applicable securities laws.
10. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.
11. Transfer, Division and Combination.
-----------------------------------
(a) Subject to compliance with any applicable
securities laws and the terms and conditions set forth in Sections 1, 11(e) and
19(b) hereof, this Warrant and all rights hereunder are transferable, in whole
or in part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant substantially in the
form attached hereto duly executed by the Holder or its duly authorized agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled.
(b) Subject to Section 21(f), this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its duly authorized agent or attorney; provided, however, that
Warrants to purchase less than 25,000 Warrant Shares need not be issued, unless
less than 25,000 Warrant Shares remain available for purchase. Subject to
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compliance with Section 11(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(c) The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 11.
(d) The Company agrees to maintain, at its aforesaid
office, books for the registration and the registration of transfer of the
Warrants.
(e) If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions and shall be
reasonably satisfactory to the Company) to the effect that such transfer may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws and (ii) that the Holder or transferee execute and
deliver to the Company an investment letter in form and substance reasonably
acceptable to the Company.
12. No Rights as Shareholder until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company prior to the exercise hereof. The Company shall be entitled to treat
the Holder of the Warrant as the owner in fact thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith.
13. Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, an indemnity and security reasonably satisfactory to it
(which may include the posting of a bond), and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
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14. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a day that is not a
Trading Day, then such action may be taken or such right may be exercised on the
next succeeding day not a Saturday, Sunday or day that is not a Trading Day.
15. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of any of the following. In case the Company, at any time
while the Warrant is outstanding, shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to all holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine (including by way of reverse
stock split) its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive the kind and number of
Warrant Shares or other securities of the Company which it would have owned or
have been entitled to receive had such Warrant been exercised in advance
thereof. Upon each such adjustment of the kind and number of Warrant Shares or
other securities of the Company which are purchasable hereunder, the Holder
shall thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant Share
or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing by the number
of Warrant Shares or other securities of the Company that are purchasable
pursuant hereto immediately after such adjustment. An adjustment made pursuant
to this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
16. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in, or distribution with respect to, the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all of
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of all or substantially all of its assets, shares of common stock of
the successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of the Company, then the Holder
shall have the right thereafter to receive upon exercise of this Warrant, the
number of shares of common stock of the successor or acquiring corporation or of
the Company, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification, merger,
-7-
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume this Warrant and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 16. For purposes of
this Section 16, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 16 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
17. Voluntary Adjustment by the Company. The Company may at
any time during the term of this Warrant reduce the then current Exercise Price
to any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
18. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Company shall give notice thereof to the Holder, which notice shall state
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
19. Registration under the Securities Act.
--------------------------------------
(a) Incidental Registration. If the Company at any time or
from time to time during the term of this Warrant proposes to register any of
its securities under the Securities Act (other than in a registration on Form
S-4 or S-8 or any successor form to such forms) whether or not pursuant to
registration rights granted to other holders of its securities and whether or
not for sale for its own account, the Company shall deliver prompt written
notice (which notice shall be given at least 15 days prior to such proposed
registration) to the Holder of its intention to undertake such registration,
describing in reasonable detail the proposed registration and distribution
(including the anticipated range of the proposed offering price, the class and
number of securities proposed to be registered and the distribution
arrangements) and of the Holders' right to participate in such registration
under this Section 19(a) as hereinafter provided. Subject to the other
provisions of this Section 19(a), upon the written request of the Holder made
within 5 days after the receipt of such written notice (which request shall
specify the amount of securities to be registered and the intended method of
disposition thereof), the Company shall effect the registration under the
Securities Act of all Warrant Shares requested by the Holder to be so registered
(an "Incidental Registration"), to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Warrant Shares so to be registered, by inclusion of such Warrant Shares in
the registration statement (the "Incidental Registration Statement") which
covers the securities which the Company proposes to register and shall use
commercially reasonable efforts to cause such registration statement to become
-8-
effective. The Holder may, at any time prior to the effective date of the
Incidental Registration Statement (and for any reason), revoke such request by
delivering written notice to the Company revoking such requested inclusion. The
Company shall pay the reasonable out-of-pocket expenses incident to performance
of or compliance with this agreement by the Company ("Registration Expenses")
relating to the preparation and filing of such registration statement.
If at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
Incidental Registration Statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to the Holder and, thereupon, (A) in the case of a
determination not to register, the Company shall be relieved of its obligation
to register any Warrant Shares in connection with such registration (but not
from its obligation to pay Registration Expenses incurred in connection
therewith), and (B) in the case of a determination to delay such registration,
the Company shall be permitted to delay the registration of the Warrant Shares
for the same period as the delay in registering such other securities. The
Company shall have no obligation to effect more than one Incidental Registration
per 12-month period pursuant to this Section 19(a).
In connection with any offering involving an underwriting
of shares of the Company's capital stock pursuant to this Section 19(a), the
Company shall not be required to include any of the Warrant Shares in such
underwriting unless the Holder accepts the terms of the underwriting as agreed
upon between the Company and its underwriters, and then only in such quantity as
the underwriters determine in their reasonable discretion will not jeopardize
the success of the offering by the Company. If the total number of securities,
including Warrant Shares, requested by stockholders to be included in such
offering exceeds the amount of securities to be sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Warrant Shares, which
the underwriters and the Company determine in their sole discretion will not
jeopardize the success of the offering.
(b) Certain Limitations.
(i) Furnish Information. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to Section 19 with respect to the Warrant Shares of any selling Holder
that such Holder shall furnish to the Company such information regarding itself,
the Warrant Shares held by it, and the intended method of disposition of such
securities as shall be reasonably required to effect the registration of such
Holder's Warrant Shares.
(ii) Nontransferability of Rights; Approval
Required. Notwithstanding anything in this Warrant to the contrary, the rights
granted to Holder in this Section 19 are nontransferable without the prior
written consent of the Company (which may be unreasonably withheld). This
Section 19 shall be omitted from any Warrant issued to an assignee of Holder
unless the Company has consented in writing to the assignment.
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(iii) Confidentiality Requirement. The
Company's obligations under Section 19(a) shall be subject to the Holder's prior
execution of a confidentiality agreement in form and substance reasonably
acceptable to the Company to keep confidential the fact of the proposed
registration, and not to enter into any agreements with respect to the purchase
or sale of securities of the Company, until the Company has publicly announced
the details related to such registration (or determined not to proceed with such
registration).
20. Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of the principal market
upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
21. Miscellaneous.
--------------
(a) Governing Law; Venue; Waiver of Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of Utah, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Warrant (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in Salt
Lake County, Utah (the "Salt Lake County Courts"). Each party hereby irrevocably
submits to the exclusive jurisdiction of the Salt Lake County Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or that
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the Salt Lake County Courts are an improper or inconvenient venue for such
proceeding. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED THEREBY. If either party shall
commence an action or proceeding to enforce any provisions of this Warrant, then
the prevailing party in such action or proceeding shall be reimbursed by the
other party for its attorneys' fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such action or proceeding.
(b) Restrictions. The Holder acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or
any delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's rights, powers
or remedies, notwithstanding all rights hereunder terminate on the Termination
Date.
(d) Notices. All notices and other communications
required or permitted hereunder shall be in writing, shall be effective when
given, and shall in any event be deemed to be given upon receipt or, if earlier,
(a) five (5) days after deposit with the U.S. Postal Service or other applicable
postal service, if delivered by first class mail, postage prepaid, (b) upon
delivery, if delivered by hand, (c) one business day after the business day of
deposit with Federal Express or similar overnight courier, freight prepaid or
(d) one business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first class mail, postage
prepaid, and shall be addressed (i) if to the Holder, at the Holder's address as
set forth in the records of the Company, and (ii) if to the Company, at the
address of its principal corporate offices (attention: President), or at such
other address as a party may designate by ten days advance written notice to the
other party pursuant to the provisions above.
(e) Successors and Assigns. Subject to applicable
securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of Holder; provided, however, that the
Holder may not assign its rights to a competitor or potential competitor of the
Company.
(f) Amendment. This Warrant may be modified or
amended or the provisions hereof waived only with the written consent of the
Company and the Holder; provided that in the event this Warrant has been divided
in accordance with Section 11(b), the Warrants into which this Warrant has been
divided shall be collectively referred to as the "Transaction Warrants" and the
Transaction Warrants may be modified or amended or the provisions thereof waived
only with the written consent of the Company and the Holders of Transaction
Warrants entitling the Holders thereof to purchase at least seventy five percent
(75%) of the shares of Common Stock subject to the then outstanding Transaction
-11-
Warrants. Any amendment or waiver effected in accordance with this Section 21(f)
shall be binding upon the Holder and each future Holder of this Warrant.
(g) Severability. If any provision of this Warrant is
held to 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 to agree
upon a valid and enforceable provision that is a reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this
Warrant.
(h) Construction. 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. The language used in
this Warrant will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
(i) Interpretation. Unless the context otherwise
requires, the terms defined in this Section 21 shall have the meanings herein
specified for all purposes of this Warrant, applicable to both the singular and
plural forms of any of the terms defined herein. When a reference is made in
this Warrant to a Section, such reference shall be to a Section of this Warrant
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Warrant, they shall be deemed to be followed by the
words "without limitation." The use of any gender herein shall be deemed to
include the neuter, masculine and feminine genders wherever necessary or
appropriate.
********************
-12-
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: August 14, 2006
ARKONA, INC.
By: ________________________________________
Name: _____________________________________
Title: ____________________________________
-13-
EXHIBIT A
NOTICE OF EXERCISE
TO: Arkona, Inc.
00000 Xxxxx Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000-3907
Attention: President
Xxxxxxxxx: 801.501.0701
1. The undersigned hereby elects to purchase __________ Warrant Shares pursuant
to the terms of the attached Warrant.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached
Warrant by means of a cash payment, and tenders
herewith payment in full for the purchase price of
the shares being purchased, together with all
applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached
Warrant by means of the net exercise provisions of
Section 7 of the Warrant.
3. Please issue a certificate or certificates representing said Warrant Shares
in the name of the undersigned or in such other name as is specified below:
---------------------------------
(Name)
---------------------------------
---------------------------------
(Address)
4. The undersigned hereby represents and warrants that the aforesaid Warrant
Shares are being acquired for the account of the undersigned for investment and
not with a view to, or for resale, in connection with the distribution thereof,
and that the undersigned has no present intention of distributing or reselling
such shares and all representations and warranties of the undersigned set forth
in Section 4 of the attached Warrant (including Section 4(e) thereof) are true
and correct as of the date hereof.
----------------------------------
(Signature)
----------------------------------
(Name)
------------------------------ ----------------------------------
(Date) (Title)
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________ shares of common stock of Arkona,
Inc. to which the attached Warrant relates, and appoints ______________ attorney
to transfer such right on the books of __________, with full power of
substitution in the premises.
Dated: ______________, _______
Holder's Signature: _____________________________________
Holder's Address:________________________________________
________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
