EXHIBIT 10.51
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: NQL Inc., a Delaware corporation
Number of Shares: 50,000
Class of Stock Common
Initial Exercise Price: $1.51 per share
Issue Date May 31, 2001
Expiration Date: May 30, 2005
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and for
other good and valuable consideration, the receipt thereof is hereby
acknowledged, Keltic Financial Partners, LP or registered assignee ("Holder") is
entitled to purchase the number of fully paid and non-assessable shares of the
Class of Stock (the "Shares") of the corporation (the "Company") at the Initial
Exercise Price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant in whole or in
part by delivering this Warrant and a duly executed Notice of Exercise in
substantially the form attached as Appendix I to the principal office of the
Company located at 0 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx 00000, or
such other office as the Company shall advise the Holder, as herein provided.
Unless Holder is exercising the conversion right set forth in Section 1.2,
Holder shall also deliver to the Company a check for the aggregate Warrant Price
for the Shares being purchased. In the event the Warrant is not exercised in
full, the Company, at its expense, shall forthwith issue and deliver to or upon
the order of Holder a new Warrant of like tenor and date in the name of Holder
or as Holder may request, calling in the aggregate on the face thereof for the
number of Shares equal (without giving effect to any adjustment therein) to (i)
the number of Shares called for on the face of this Warrant minus (ii) the
number of Shares for which this Warrant shall have been exercised without giving
effect to any adjustment in the number as a result of changes in the Warrant
Price.
1.2 Conversion Right. (a) In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant (the
"Conversion Right"), in whole or in part, into a number of Shares determined by
dividing (a) the aggregate fair market value of the Shares or other securities
otherwise issuable upon exercise of this Warrant minus the aggregate Warrant
Price of such Shares by (b) the fair market value of one Share. The fair
market value of the Shares shall be determined pursuant to Section 1.5. (b) The
Conversion Right may be exercised by the Holder, at any time, or from time to
time, prior to the Expiration Date, on any business day by delivering a written
notice (the "Conversion Notice") in the form attached as Appendix II to the
Company at its principal office exercising the Conversion Right and specifying
(i) the total number of Shares the Holder will purchase pursuant to such
conversion and (ii) a place and date not less than one nor more than 20 business
days from the date of the Conversion Notice to the closing of such purchase.
1.3 Payment of Taxes. The Company shall pay all documentary stamp taxes, if
any, attributable to the issuance of the Warrant and the Shares; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any
certificates for Shares in a name other than that of the Holder upon exercise of
the Warrant, or any portion thereof and upon exercise of any new warrant issued
in accordance with Section 1.1, and the Company shall not be required to issue
or deliver such certificates unless and until the persons requesting the
issuance thereof have paid to the Company the amount of such tax or shall have
established to the reasonable satisfaction of the Company that such tax has been
paid.
1.4 Intentionally Omitted
1.5 Fair Market Value. If the Shares are traded regularly in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
1.6 Delivery of Certificate. Promptly after Holder exercises or converts
this Warrant, the Company shall deliver to Holder certificates for the number of
fully paid and non-assessable Shares acquired in the name of the Holder or its
designee.
1.7 Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of this Warrant, the Company
at its expense shall execute and deliver, in lieu of this Warrant a new warrant
of like tenor.
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1.8 Repurchase on Sale, Merger, or Consolidation of the Company.
1.8.1. "Acquisition." For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.8.2. Assumption of Warrant. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall not consummate any Acquisition unless the
acquiring or surviving entity assumes, by written instrument executed and
delivered to the Holder, the obligations of this Warrant.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise or conversion of this Warrant, for each Share acquired,
Holder shall receive, without cost to Holder, the total number and kind of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Treasury Shares. For the purposes of this Section 2., the number of
Shares at any time outstanding shall not include the Shares held in the treasury
of the Company.
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2.5 No Impairment. The Company shall not, by amendment of its Articles of
Incorporation or through a 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 to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the reasonable details upon which such adjustment is based.
The Company shall, as soon as practicable after such adjustment, furnish Holder
a certificate setting forth the Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) Reservation of Shares. The Company shall, at all times, reserve
and keep available out of its authorized and unissued Common Stock or out of
shares of its treasury stock, solely for the purpose of issue upon exercise of
the purchase rights evidenced by this Warrant, the number of Shares for which
this Warrant can be exercised.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, shall, upon issuance and payment therefore
pursuant to the terms hereof, be duly authorized, validly issued, fully paid and
non-assessable, and free of any liens and encumbrances except for restrictions
on transfer provided for herein or under applicable federal and state securities
laws.
(c) No Valuation or Impairment. The Company shall not, by amendment of
its Certificate of Incorporation, including without limitation, amendment of the
par value of its Common Stock, or through reorganization, consolidation, merger,
dissolution, issuance of capital stock or sale of treasury stock (otherwise than
upon exercise of the Warrant) or sale of assets, by effecting any subdivision of
or stock split or stock dividend with respect to its Common Stock, or by any
other voluntary act or deed, avoid or seek to avoid the material performance or
observance of any of the stipulations or conditions in this Warrant to be
observed or performed by the Company. The Company shall, at all times, act in
good faith to assist in the carrying out of all of the provisions of this
Warrant and in taking all other action that may be necessary in order to protect
the rights of the Holder as set forth in this Warrant.
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(d) Maintenance of Office. The Company shall maintain an office where
presentation of this Warrant may be made. The Company shall give notice, in
writing, to the Holder of each change in the location of such office.
3.2 Notice Of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or any
of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares shall be subject to the registration rights set forth on
Exhibit C.
ARTICLE 4. MISCELLANEOUS.
4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix III not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder,
4.2 Legends. This Warrant and the Shares shall be imprinted with a legend
in substantially the following form:
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THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant may not be transferred or assigned in
whole or in part without compliance with applicable federal and state securities
laws by the transferor and the transferee (including, without limitation, the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
may transfer all or part of this Warrant by giving the Company notice of the
Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s). Unless the Company is filing
financial information with the SEC pursuant to the Securities Exchange Act of
1934, the Company shall have the right to refuse to transfer this Warrant to any
person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
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NQL Inc.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
-------------------------------------
Title: CFO
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APPENDIX I
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _____ shares of the Common
Stock of NQL Inc. issuable pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
______ number of Shares in the manner specified in the Warrant. This conversion
is exercised with respect to _____ Shares covered by the Warrant
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
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3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
---------------------------------------
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(Signature)
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(Date)
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APPENDIX II
CONVERSION NOTICE
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APPENDIX III
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
------------------, ----
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Gentleperson:
This is to advise you that the Warrant issued to you described below will
expire on May __, 2005.
Issuer: NQL Inc.
Issue Date: May __, 2001
Class of Security Issuable: Common
Exercise Prize Per Share: $_______
Number of hares Issuable: 50,000
Procedure far Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your
only notice of pending expiration.
NQL Inc.
By: ___________________________________
Its: ___________________________________
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EXHIBIT A
INTENTIONALLY OMITTED
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EXHIBIT B
INTENTIONALLY OMITTED
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EXHIBIT C
Registration Rights
The Holder shall have the following Registration Rights relating to shares
held by Holder pursuant to exercise of this Warrant ("Holder Shares").
(1) Registration. If the Company at any time proposes for any reason to
register authorized but unissued shares of Common Stock held by the Company in
its treasury ("Primary Shares") or shares issued to Hampshire Equity Partners
II, LP ("Hampshire Registrable Shares") under the Securities Act (other than on
Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall promptly give written notice to holders of the Company's
Common Stock that are contractually entitled to request registration of shares
of Common Stock, of its intention to so register the Primary Shares or Hampshire
Registrable Shares and, upon the written request, given within 20 days after
delivery of any such notice by the Company, of Holder to include in such
registration Holder Shares (which request shall specify the number of Holder
Shares proposed to be included in such registration), the Company shall use its
best efforts to cause all such Holder Shares to be included in such registration
on the same terms and conditions as the securities otherwise being sold in such
registration; provided, however, that if the managing underwriter advises the
Company that the inclusion of all of the Primary Shares, Holder Shares and other
unregistered shares ("Other Shares") proposed to be included in such
registration would interfere with the successful marketing (including pricing)
of Primary Shares or Hampshire Registrable Shares proposed to be registered by
the Company, then the number of Primary Shares, Hampshire Registrable Shares,
Holder Shares and Other Shares proposed to be included in such registration
shall be included in the following order:
(i) first, the Primary Shares;
(ii) second, the Hampshire Registrable Shares, and
(iii) third, the Holder Shares and Other Shares.
(2) Expenses. With respect to each registration effected, all fees, costs
and expenses of and incidental to such registration and the public offering in
connection therewith shall be borne by the Company; provided, however, that the
Holder participating in any such registration shall bear the underwriting
discounts and selling commissions attributable to the shares of Holder's
Registrable Stock sold in such public offering.
(3) Indemnification and Contribution.
(a) To the fullest extent permitted by law, the Company will indemnify
and hold harmless the Holder and any underwriter (as defined in the
Securities Act of 1993, as amended (the "Securities Act") acting for
Holder, and any person who controls such Holder or such underwriter within
the meaning of the Securities Act, from and against, and will reimburse
Holder and each such underwriter and controlling person with respect to,
any and all claims, actions, demands, losses, damages, liabilities, costs
and expenses to which Holder or any such underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as such
claims, actions, demands, losses, damages, liabilities, costs or expenses
arise out of or are based upon any untrue statement
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or alleged untrue statement of any material fact contained in any
Registration Statement, any prospectus contained therein or any amendment
or supplement thereto in which shares of the Holder are included, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or arise out of any violation by the
Company of any rule or regulation under the Securities Act applicable to
the Company and relating to action or inaction required of the Company in
connection with such registration; provided, however, that the Company will
not be liable in any such case to the extent that any such claim, action,
demand, loss, damage, liability, cost or expense is caused by an untrue
statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in strict conformity with information furnished
by Holder, such underwriter or such controlling person in writing
specifically for use in the preparation thereof.
(b) If shares of the Holder are included in a registration, the Holder
will indemnify and hold harmless the Company from and against, and will
reimburse the Company with respect to, any and all losses, damages,
liabilities, costs or expenses to which the Company may become subject
under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained therein or any amendment or
supplement thereto, or are caused by the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
are made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in strict conformity
with written information furnished by Holder specifically for use in the
preparation thereof.
(c) Promptly after receipt by a party to be indemnified pursuant to
the provisions of paragraph (a) or (b) (an indemnified party) of notice of
the commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of paragraph (a) or (b), notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to an indemnified
party otherwise than under the provisions of this paragraph and shall not
relieve the indemnifying party from liability under the provisions of this
paragraph unless such indemnifying party is prejudiced by such omission. In
case such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party
shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to
the provisions of such paragraph (a) and (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall be liable to an indemnified party for any
settlement of any action or claim without the consent of the indemnifying
party; no indemnifying party may unreasonably withhold its consent to any
such settlement. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim
or litigation.
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(4) Lock-Up Agreement. In consideration of the assumption by the Company of
its obligations hereunder, Holder agrees in connection with any registration of
the Company's securities that, upon the request of the Company or the
underwriter of any underwritten offering of the Company's securities, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Stock (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as the
Company or the underwriters may reasonably specify.
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