Exhibit 10.5
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER
AND AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED.
THIS SECURITY, AND THE SHARES ISSUABLE UPON EXERCISE HEREOF, ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND IN
THE SHAREHOLDERS AGREEMENT DATED AS OF MAY 1, 1998 (A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER HEREOF). NO
REGISTRATION OF TRANSFER OF SUCH SECURITY OR SHARES WILL BE MADE
ON THE BOOKS OF THE ISSUER AND NO SHARES SHALL BE ISSUED TO ANY
PERSON OTHER THAN THE REGISTERED HOLDER OF THIS SECURITY UNLESS
AND UNTIL ALL APPLICABLE RESTRICTIONS ON TRANSFER CONTAINED IN
SUCH SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
STOCK PURCHASE WARRANT
Date of Issuance: May 1, 1998 Certificate No. 3
For value received, CHADMOORE WIRELESS GROUP, INC., a Colorado
corporation (the "Company"), hereby grants to RECOVERY EQUITY INVESTORS II,
L.P., a Delaware limited partnership, or its registered assigns (the "Registered
Holder"), the right to purchase from the Company, at any time or from time to
time during the Exercise Period, 10,119,614 Warrant Shares at the Exercise
Price. This Warrant is issued to REI on the Date of Issuance pursuant to the
Investment Agreement. The Exercise Price and number of Warrant Shares (and the
amount and kind of other securities) for which this Warrant is exercisable shall
be subject to adjustment as provided herein. Certain capitalized terms used
herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this Warrant may
be exercised, in whole or in part, at any time and from time to time, commencing
on the Date of
Issuance through 5:00 p.m., Nevada time, on October 31, 2003, or, if such day is
not a Business Day, on the next succeeding Business Day (the "Exercise Period").
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when all
of the following items have been delivered to the Company (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 1C below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser"); provided,
however, that such exercise is for not less than the lesser of 1,000,000
Warrant Shares or the number of Warrant Shares remaining hereunder.
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) either (i) a check or wire transfer payable to the
Company in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares being purchased upon such exercise (the
"Aggregate Exercise Price") or (ii) the surrender to the Company of debt
or other obligations of the Company or any of its direct or indirect
subsidiaries having a value equal to the Aggregate Exercise Price of the
Warrant Shares being purchased upon such exercise.
(ii) Certificates for Warrant Shares (including, without
limitation, fractional shares) purchased upon exercise of this Warrant shall be
delivered by the Company to the Purchaser within three Business Days after the
date of the Exercise Time. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the Company shall
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised
and shall, within such three Business Day period, deliver such new Warrant to
the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
Registered Holder of such Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance
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tax in respect thereof or other cost incurred by the Company in connection with
such exercise and the related issuance of Warrant 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 issuance of any Warrants or
any certificates representing Warrant Shares in a name other than that of a
Registered Holder, and the Company shall not be required to issue or deliver
such Warrant or certificate for Warrant Shares unless and until the Person
requesting the issuance thereof shall 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.
(v) The Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share, if any, of the unissued
Warrant Shares acquirable upon exercise of this Warrant is at all times equal to
or less than the Exercise Price then in effect. In the event that the Company
fails to comply with its obligations set forth in the foregoing sentence, in
addition to all other rights which the Registered Holder or Purchaser may have
at law or in equity, the Purchaser may (but shall not be obligated to) purchase
Warrant Shares hereunder at par value, and the Company shall be obligated to
reimburse the Purchaser for the aggregate amount of consideration paid in
connection with such exercise in excess of the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any reasonable
request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a public
offering or a sale of the Company (pursuant to a merger, sale of stock, sale of
assets or otherwise), then such exercise may at the election of the Registered
Holder be conditioned upon the consummation of such transaction, in which case
such exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued Warrant Shares and solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant. All Warrant Shares which are so
issuable shall, when issued and upon the payment of the applicable Exercise
Price, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Company shall take all such actions as may be
necessary to ensure that all such Warrant Shares may be so issued without
violation by the Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock or other securities constituting Warrant Shares
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may be listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance) or any violation by the
Company of any agreement to which the Company or any of its assets or properties
may be subject. The Company will cause the Warrant Shares, immediately upon such
exercise, to be listed on each domestic securities exchange or quotation system
upon which shares of Common Stock or other securities constituting Warrant
Shares are listed or quoted at the time of such exercise.
(ix) If the Warrant Shares issuable by reason of exercise of this
Warrant are convertible into or exchangeable for any other stock or securities,
then the Company shall, at the Purchaser's option and upon surrender of this
Warrant by such Purchaser as provided above together with any notice, statement
or payment required to effect such conversion or exchange of Warrant Shares,
deliver to such Purchaser (or as otherwise specified by such Purchaser) a
certificate or certificates representing the stock or securities into which the
Warrant Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1C. Exercise Agreement. Upon any exercise of this Warrant, the Purchaser
shall deliver to the Company an Exercise Agreement in substantially the form set
forth in Exhibit I hereto, except that if the Warrant Shares are not to be
issued in the name of the Registered Holder, the Exercise Agreement shall also
state the name of the Person to whom the certificates for the Warrant Shares are
to be issued, and if the number of Warrant Shares to be issued does not include
all of the Warrant Shares purchasable hereunder, it shall also state the name of
the Person to whom a new Warrant for the unexercised portion of the rights
hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order
to prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever, on or after the Date of Issuance, either (x) the
Company issues or sells, or in accordance with Section 2B is deemed to have
issued or sold, other than pursuant to a Permitted Issuance, other than upon the
exercise, exchange or conversion of Floating Price Securities and other than
pursuant to an event for which an adjustment is made pursuant to Section 2C, any
shares of Common Stock for a consideration per share less than the Exercise
Price in effect immediately prior to such issuance or sale, or (y) the Company
issues or sells any shares of Common Stock upon exercise, exchange or conversion
of any Floating Price Securities for a consideration per share less than the
Deemed Issue Price in effect immediately prior to such issuance, then
immediately upon such issuance or sale (A) the Exercise Price shall be reduced
to equal the amount determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by a fraction, the numerator of which
will be the sum of (1) the number of shares
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of Common Stock Deemed Outstanding immediately prior to such issuance or sale
multiplied by the Exercise Price in effect immediately prior to such issuance or
sale, plus (2) the consideration, if any, received by the Company upon such
issuance or sale, and the denominator of which will be the product derived by
multiplying the Exercise Price in effect immediately prior to such issuance or
sale by the number of shares of Common Stock Deemed Outstanding immediately
after such issuance or sale and (B) in the case of an issuance described in (y)
above, the Deemed Issue Price shall be reduced in a manner proportional to the
reduction to the Exercise Price pursuant to clause (A) above. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares
acquirable upon exercise of this Warrant shall be adjusted to equal the number
of shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable (whether or
not then acquirable or subject to a contingency) upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. For purposes of this Section 2,
the calculation of the number of shares of Common Stock Deemed Outstanding shall
exclude the number of Warrant Shares issuable upon exercise of the Warrants.
2B. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner
grants any rights or options to subscribe for or to purchase (including, without
limitation, the issuance of any notes or other debt instruments convertible into
or payable in) Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (including without limitation convertible common
stock) (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities") other than a Permitted Issuance, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the Exercise Price in
effect immediately prior to such issuance or sale, then the total maximum number
of shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of this paragraph, the "price per share for which Common
Stock is issuable upon exercise of such Options or upon conversion or exchange
of such Convertible Securities" is determined by dividing (A) the total amount,
if any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in the case
of such Options which are exercisable for Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Exercise Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon the exercise of
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such Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Exercise Price in effect immediately prior to such issuance or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
this paragraph, the "price per share for which Common Stock is issuable upon
such conversion or exchange" is determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issuance or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Exercise Price has been or is to be
made pursuant to other provisions of this Section 2B, no further adjustment of
the Exercise Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If either the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock shall change at any time (other than with
respect to Options or Convertible Securities constituting Floating Price
Securities which are the subject of 2A(y)), the Exercise Price in effect at the
time of such change shall be adjusted to the Exercise Price which would have
been in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of Warrant Shares shall be correspondingly
readjusted; provided, that no readjustment shall be made pursuant to this clause
(iii) in respect of any Warrant Shares which have been issued on or prior to the
occurrence of any action otherwise requiring such readjustment.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, in either case without the
exercise of such Option or right, the Exercise Price then in effect and the
number of Warrant Shares acquirable hereunder (whether or not then acquirable or
subject to a contingency) shall be adjusted to the Exercise Price and number of
Warrant Shares which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent not
exercised in full and outstanding immediately prior to such expiration or
termination, never been issued; provided, that no
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readjustment shall be made under this clause (iv) in respect of any Warrant
Shares which have been issued on or prior to such expiration or termination.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company shall be the market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any
merger or other business combination in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash or
marketable securities shall be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
investment banking or appraisal firm jointly selected by the Company and the
Required Holders, whose determination shall be final and binding on the Company
and the Registered Holder. If the Required Holders and the Company are unable to
agree upon an independent investment banking or appraisal firm, then the
Required Holders shall select one such independent investment banking or
appraisal firm and the Company shall select another such firm, and the
calculation of fair value shall be made by a third independent investment
banking or appraisal firm that has been selected by the two firms so chosen by
the Required Holders and the Company. In each such case, the firm calculating
fair value shall submit to the Company and to each Registered Holder such firm's
written opinion addressed to each such Registered Holder setting forth such
determination of fair value. If the independent investment banking or appraisal
firm gives a range for its calculation of fair value, then fair value for
purposes of this paragraph shall be the midpoint of such range. The fees and
expenses of such firm shall be paid by the Company.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Option shall be deemed to
have been issued for no consideration.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any direct or indirect subsidiary of the Company
and the disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock.
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(viii) Record Date. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
2C. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, then the Exercise Price and Deemed Issue Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency), as the case may be, shall be
proportionately increased. If the Company at any time combines (by reverse stock
split or otherwise) the Common Stock into a smaller number of shares, then the
Exercise Price and Deemed Issue Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant (whether or not then acquirable or
subject to a contingency), as the case may be, shall be proportionately
decreased.
2D. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change". Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the Required
Holders) to ensure that such Registered Holder shall thereafter have the right
to acquire and receive upon exercise thereof, in lieu of or addition to (as the
case may be) the Warrant Shares immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrants (whether or not
then acquirable or subject to a contingency), such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable
(whether or not then acquirable or subject to a contingency) upon exercise of
such Registered Holder's Warrants had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Required Holders) with respect to such Registered
Holder's rights and interests to insure that the provisions hereof (including,
without limitation, Sections 2, 3 and 4) shall thereafter be applicable to the
Warrants (including, without limitation, in the case of any such Organic Change
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the product of the Exercise Price
immediately prior to such Organic Change multiplied by the ratio of such value
of the Common Stock reflected by the terms of such Organic Change divided by the
Fair Market Value of the Common Stock in effect immediately prior to
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such Organic Change and a corresponding immediate adjustment to the number of
Warrant Shares acquirable and receivable upon exercise of the Warrants (whether
or not then acquirable or subject to a contingency), if the value so reflected
is less than the Fair Market Value of the Common Stock in effect immediately
prior to such Organic Change). The Company shall not effect any such Organic
Change unless, prior to the consummation thereof, the successor entity (if other
than the Company) resulting from such Organic Change (including a purchaser of
all or substantially all the Company's assets) assumes by written instrument (in
form and substance satisfactory to the Required Holders) the obligation to
deliver to such Registered Holder such shares of stock, securities or assets as,
in accordance with the foregoing provisions, such Registered Holder may be
entitled to acquire upon exercise of Warrants.
2E. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price, the Deemed Issue Price and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency) so as to protect the rights of
the Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof other than as a readjustment in a manner consistent with
that contemplated by Section 2(B)(iv).
2F. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 30 days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock, or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. Purchase Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of the Common Stock
(the "Purchase Rights"), then the Registered Holder shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Registered
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Holder would have acquired if such Registered Holder had held the maximum number
of Warrant Shares acquirable (whether or not then acquirable or subject to a
contingency) upon complete exercise of this Warrant immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
SECTION 4. Definitions. The following terms have the meanings set forth
below and terms not otherwise defined herein have the meaning assigned to them
in the Investment Agreement:
"Affiliate" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (ii) any other Person that owns or controls 5% or more of any class
of equity securities (including any equity securities issuable upon the exercise
of any Option or the conversion or exchange of any Convertible Securities) of
that Person or any of its Affiliates, or (iii) any member, director, partner,
officer, agent, employee or relative of such Person or any of its direct or
indirect Affiliates. For the purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise. With respect to a natural person, the term "Affiliate"
also shall include such person's spouse and lineal descendants.
"Aggregate Exercise Price" has the meaning ascribed to it in Section
1B(i)(d).
"Bankruptcy Law" means Title 11 of the United States Code and any
similar federal or state law for the relief of debtors.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New York, Nevada or California are
authorized or obligated to close.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company, any securities into which such Common Stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of all classes of the Company's Common Stock actually outstanding at
such time, plus the number of shares of the Company's common stock deemed to be
outstanding pursuant to Section 2B(i) or 2B(ii) hereof.
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"Company" has the meaning ascribed to it in the first paragraph of this
Warrant.
"Convertible Securities" has the meaning ascribed to it in Section
2B(i).
"Date of Issuance" means May 1, 1998 the Company initially issues this
Warrant regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued.
"Deemed Issue Price" means $0.50, as such price may be adjusted from
time to time pursuant to Section 2 hereof.
"Exercise Period" has the meaning ascribed to it in Section 1A.
"Exercise Price" means $0.39 for each Warrant Share as such price may be
adjusted from time to time pursuant to Section 2 hereof.
"Exercise Time" has the meaning ascribed to it in Section 1B(i).
"Fair Market Value" means, with respect to each share of Common Stock as
of a particular date (i) the average of the closing sales prices on such date of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 P.M., New York time, as reported
on the Nasdaq National Market, in each such case averaged over a period of 40
trading days consisting of the day before "Fair Market Value" is being
determined and the immediately prior 39 trading days prior to such day during
which the Common Stock was traded. Notwithstanding the foregoing, if at any time
of determination either (x) the Common Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and either listed
on a national securities exchange or authorized for quotation in the Nasdaq
National Market, or (y) less than 25% of the outstanding Common Stock is held by
the public free of transfer restrictions under the Securities Act of 1933, as
amended, then Fair Market Value shall mean the price that would be paid per
share for the entire common equity interest in the Company in an orderly sale
transaction between a willing buyer and a willing seller, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale, without discount for lack of liquidity, or minority
position. Fair Market Value shall be determined jointly by the Company's Board
of Directors in its good faith judgment and the Required Holders. If such
parties are unable to agree as to such a joint determination of Fair Market
Value within 15 days of notice by one party to the other of the necessity of
calculating Fair Market Value for purposes of this Warrant, then, such value
shall be determined by an independent investment banking or appraisal firm
mutually acceptable to the Company and the Required Holders. If the Required
Holders and the Company are unable to agree upon an independent investment
banking or appraisal firm, then the Required Holders
11
shall select one such independent investment banking or appraisal firm and the
Company shall select another such firm, and the calculation of Fair Market Value
shall be made by a third such independent investment banking or appraisal firm
that has been selected by the two firms so chosen by the Required Holders and
the Company. In each such case, the firm calculating Fair Market Value shall
submit to the Company and each Registered Holder such firm's written opinion
addressed to each such Registered Holder setting forth such determination. If
the independent investment banking or appraisal firm gives a range for its
calculation of Fair Market Value, then Fair Market Value shall be the midpoint
of such range. The fees and expenses of such firm will be borne by the Company,
and the determination of such firm will be final and binding upon all parties.
"Floating Price Securities" means the Securities listed in Section 2 of
Attachment A hereto and any other agreement, instrument, document or
understanding in existence on the Date of Issuance (other than the securities
listed in Sections 1 and 3 of Attachment A hereto) pursuant to which the Company
is either obligated or permitted to issue shares of Common Stock.
"Fully Diluted Basis" means, with respect to the calculation of the
number of shares of Common Stock, as of each date of determination thereof, the
sum of (i) all shares of Common Stock outstanding at the time of determination
and (ii) all shares of Common Stock issuable upon the exchange, exercise,
conversion or payment with respect to all Options and Convertible Securities
then outstanding.
"Identified Securities" means the securities listed in Attachment A
hereto.
"GAAP" means generally accepted accounting principles consistently
applied.
"Investment Agreement" means the Investment Agreement, dated as of the
date hereof, between the Company and REI (as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof).
"Options" has the meaning ascribed to it in Section 2B(i).
"Organic Change" has the meaning ascribed to it in Section 2D.
"Permitted Issuance" means (i) the issuance from time to time by the
Company of shares of Common Stock upon exercise of the Warrants, the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 14,612,796 shares of Common Stock (subject to adjustment), the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 4,000,000 shares of Common Stock (subject to adjustment) or any New
Warrants (as each such Warrant may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof) (and any
replacements thereof), (ii) the issuance from time to time by the Company of
Identified Securities or of shares of Common Stock upon the exercise of
Identified Securities other than Floating Price
12
Securities, (iii) the issuance from time to time by the Company of New Warrants
and (iv) the issuance by the Company of shares of Common Stock in accordance
with the terms of Section 4.20 of the Investment Agreement.
"Person" means any individual, corporation, joint stock corporation,
limited liability company or partnership, general partnership, limited
partnership, proprietorship, joint venture, other business organization, trust,
union, association or governmental or regulatory authority.
"Purchase Rights" has the meaning ascribed to it in Section 3.
"Purchaser" has the meaning ascribed to it in Section 1B(i)(a).
"Registered Holder" has the meaning ascribed thereto in the first
paragraph of this Warrant.
"REI" means Recovery Equity Investors II, L.P., a Delaware limited
partnership.
"Required Holders" means, at any time of determination, holders of
Warrants that represent more than 50% of all of the Warrant Shares then issuable
upon exercise of the Warrants then outstanding.
"Shareholders Agreement" means the Shareholders Agreement dated as of
May 1, 1998, among the Company, REI and the other parties thereto as such
agreement may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Warrants" means this Stock Purchase Warrant and any other Warrants
issued pursuant to Section 7 or 8.
"Warrant Shares" means shares of Common Stock; provided, that if the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Shares" shall mean shares of the security issuable upon
exercise of the Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if such security is not
issuable in shares.
SECTION 5. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Registered Holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such Registered Holder for the Exercise Price of
Warrant Shares acquirable by exercise hereof or as a stockholder of the Company.
SECTION 6. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part,
13
without charge to the Registered Holder (subject to the provisions of paragraph
1B(iv) hereof), upon surrender of this Warrant with a properly executed
Assignment (in the form of Exhibit II hereto) at the principal office of the
Company. The Registered Holder shall not sell, transfer or otherwise dispose of
this Warrant or any Warrant Shares, in whole or in part, except pursuant to an
effective registration statement under the Securities Act or an exemption from
registration thereunder and then only in accordance with the terms of the
Shareholders Agreement.
Each certificate evidencing shares of Warrant Shares and each Warrant
issued upon such transfer shall bear the restrictive legends set forth on this
Warrant and those required by the Shareholders Agreement.
SECTION 7. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. All Warrants representing portions of the
rights hereunder are also referred to herein as "Warrants."
SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the Registered Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the same rights represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
SECTION 9. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 10. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Required Holders.
14
SECTION 11. Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 12. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. ALL QUESTIONS
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
* * * * *
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated as of the date hereof.
CHADMOORE WIRELESS GROUP, INC.
By:
-------------------------------------
Name:
Title:
Attest:
------------------------------
Name:
Title:
[Certificate No. 3]
EXHIBIT I
EXERCISE AGREEMENT
------------------
Dated:
To:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. ), hereby agrees to subscribe for the
purchase of [all of the] [Insert number] Warrant Shares covered by such Warrant
and makes payment herewith in full therefor at the price per share and in the
manner provided by such Warrant.
Signature______________________________
Address________________________________
EXHIBIT II
ASSIGNMENT
----------
FOR VALUE RECEIVED,
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (Certificate No. ) with respect to [all of the] [Insert
number] Warrant Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Dated: Signature
--------------------------------
--------------------------------
Witness
--------------------------------
Chadmoore Wireless Group, Inc. Attachment A
Section 1
---------
Convertible Securities Outstanding Securities Comments
---------------------- ---------------------- --------
See Floating Price Securities - - Section 2 See Section 2
Section 2
---------
Floating Price Securities Outstanding Securities Comments
------------------------- ---------------------- --------
Series B Preferred (related to the Settondown 1,738,120 86,906 Shares outstanding
financing) Conv. Formula = (86,906*10)/.5
Deemed Issue Price of $.50 per share
Cygni Restructured Note Due 09/98 3,345,000 10 payments of $162,750 per month
in the amount of $1,672,500 in cash or stock at market -- assumes
Deemed issue price of $0.50
Interest Due under the Cygni Note 800,000 Assumes payment in stock at the
Deemed issue price
Xxxxx Xxxxx Agreement 13,333 1/3 of $20,000 payment for development
of budgeting system at fair market value
on the date of issuance. Assumes $0.50
per share price.
Moscato Xxxxx & Partners, Inc. 79,200 $3,600 of Common Stock per month
Letter Agreement Commencing on 12/01/31 and Terminating
on 11/30/98. Assumes $0.50 per share
price.
Section 2 Cont.
--------------
Floating Price Securities Outstanding Securities Comments
------------------------- ---------------------- --------
M&A West 105,000 5,000 shares issued for signing and
Financial Consulting Services Agreement $50,000 in freely tradeably shares at an
assumed price of $0.50 per share.
Sub Total: 6,080,653
----------
Section 3
---------
Options
Options Authorized/Outstanding Comments
------ ---------------------- --------
Options Issued under the Amended 2,497,000 See Exhibit A
Non-Qualified Employee Stock Option Plan
Miscellaneous Option Issuances 3,642,305 See Exhibit B
Options Issued under the1998 Nonqualified 276,000 See Exhibit C
Stock Option Plan (Employee Pool Shares)
Remaining under the 1998 Nonqualified Stock 2,724,000 See Exhibit C
Option Plan (Employee Pool Shares)
Options Registered on Form S-8 #33-94508 25,000 See Exhibit D
Options Registered on Form S-8 #33-80405 0 See Exhibit E
Section 3 Cont.
--------------
Options
Options Authorized/Outstanding Comments
------ ---------------------- --------
Shares of Common Stock remaining under 27,500 See Exhibit E
Form S-8 #33-80405 to be issued
Shares of Common Stock remaining under 641,500 See Exhibit F
Form S-8# 333-4129 to be issued
Class A Warrants 385,604 See Exhibit G
Class B Warrants 1,931,916 See Exhibit H
Miscellaneous Issuances 881,250 See Exhibit I
Class C Warrants 150,000 See Exhibit J
Class D Warrants 150,000 See Exhibit K
Sub Total: 13,332,075
----------
Section 4
---------
Securities
Common Stock/Options to be issued to be Issued Comments
--------------------------------- ------------ --------
Cygni - Willora Restructure Shares 70,000
Options to be issued to Xxxxxxxx Xxxxxx 1,000
Sub Total: 71,000
----------
Total Common Stock Equivalents: 19,483,728
==========
