Exhibit 4.2
STOCK PURCHASE WARRANT
THIS STOCK PURCHASE WARRANT (hereinafter referred to as the "Warrant") is
made and entered into as of __________________, 1998 (the "Issuance Date"), by
and between CONVERGENCE SYSTEMS, INC., a Georgia corporation (the
"Corporation"), and ____________________ (the "Warrantholder").
W I T N E S S E T H:
WHEREAS, the Board has granted to the Warrantholder warrants to purchase
shares of the Corporation's no par value common stock (the "Common Stock"), upon
the terms and conditions herein contained;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, and of other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Warrant. Subject to the terms and conditions of this
Warrant, the Corporation hereby grants to the Warrantholder the right to
purchase _________ shares of Common Stock (the "Warrant Shares").
2. Exercise Price. The purchase price (the "Exercise Price") for each
Warrant Share shall be $10.00.
3. Exercise of Warrant.
(a) To the extent that the Warrant has become and remains exercisable
it may be exercised by the Warrantholder delivering to the Corporation a written
notice of exercise signed by the Warrantholder, in substantially the form
attached hereto as Exhibit A (a "Notice of Exercise"), together with a check
payable to the Corporation in the amount of the total purchase price for the
Warrant Shares to be purchased pursuant to the Notice of Exercise.
(b) The Warrant shall become exercisable with respect to all of the
Warrant Shares only upon the earlier to occur of the following: (i) the second
anniversary of the Issuance Date; or (ii) the effectiveness of the registration
under the Securities Act of 1933, as amended (the "Act") of the issuance of the
Warrant Shares to the Warrantholder in a "Qualified IPO." The term "Qualified
IPO" shall mean an offering of securities of the Company that is registered
under
the Act and that yields gross proceeds to the Company of at least $7,500,000.
This Warrant will expire seven years from the Issuance Date.
(c) The Warrantholder may not exercise the Warrant for less than the
full number of Warrant Shares.
(d) The Corporation shall have the right to demand that the
Warrantholder exercise this Warrant in whole upon the closing of a Qualified IPO
in which this Warrant becomes exercisable pursuant to Section 3(b) above by
delivering to the Warrantholder a written request to such effect at least 15
days prior to the closing of such Qualified IPO (a "Demand Notice"). If the
Warrantholder does not exercise the Warrant to the extent demanded in the Demand
Notice prior to the closing of such Qualified IPO, the Warrant shall be canceled
upon the closing of such Qualified IPO.
(e) Within thirty (30) days after the exercise of the Warrant as
herein provided, the Corporation shall deliver to the Warrantholder a
certificate or certificates for the Warrant Shares being issued in the name of
the Warrantholder and in such denominations as are requested by the
Warrantholder.
(f) The Corporation covenants and agrees that all Warrant Shares which
may be issued upon exercise of the Warrant shall, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, and free from all liens, claims and encumbrances, except
restrictions imposed by applicable securities laws, the Corporation's Articles
of Incorporation and/or this Warrant. The Corporation shall at all times
reserve and keep available for issuance upon the exercise of the Warrant such
number of authorized but unissued shares of Common Stock as will be sufficient
to permit the exercise in full of the Warrant.
4. Term of Warrant.
(a) The term of the Warrant shall continue in effect until the first
to occur of the following: (i) the date on which the Warrant has been fully
exercised and/or canceled pursuant to Section 3(c) hereof, with respect to all
of the Warrant Shares; or (ii) the closing of a Qualified IPO or (iii) seven
years from the Issuance Date.
(b) In the event of the Warrantholder's death, the Warrant may be
exercised hereunder by the Warrantholder's personal representative, legatees, or
heirs at law, as the case may be, and in the case of the Warrantholder's mental
incompetence, by his legal guardian, or if none has been appointed, by his duly
authorized attorney-in-fact.
5. Consent to Transfer. This Warrant, the Warrant and all rights
hereunder are nontransferable and nonassignable by the Warrantholder, other than
by the last will and testament of the Warrantholder or the laws of descent and
distribution, unless the Corporation
consents thereto in writing. Any transfer or attempted transfer except pursuant
to the preceding sentence shall be null and void and of no effect whatsoever.
6. Adjustments.
(a) If, prior to the termination of the Warrant as provided in Section
4(a) hereof:
(i) The number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Exercise
Price shall be proportionately reduced and the number of Warrant Shares
that have not theretofore been purchased by the Warrantholder shall be
proportionately increased.
(ii) The number of outstanding shares of Common Stock is
decreased by a combination or reclassification of shares, or other similar
event, the Exercise Price shall be proportionately increased and the number
of Warrant Shares that have not theretofore been purchased by the
Warrantholder shall be proportionately reduced.
If any adjustment under this Section 6(a) would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of Warrant Shares subject
to the Warrant shall be the next higher number of shares.
(b) If, prior to the termination of the Warrant as provided in Section
4(a) hereof, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock shall be changed into the same or a different number of
shares of the same or another class or classes of stock or securities of the
Corporation or another entity, then the Warrantholder shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the Warrant Shares immediately
theretofore purchasable and receivable upon the exercise of the Warrant, such
shares of stock and/or securities as may be issued or payable with respect to or
in exchange for the number of Warrant Shares immediately theretofore purchasable
and receivable upon the exercise of the Warrant had such merger, consolidation,
exchange of shares, recapitalization or reorganization not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of the Warrantholder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares purchasable upon the exercise of the Warrant) shall
thereafter be applicable, as nearly as may be practicable in relation to any
shares of stock or securities thereafter deliverable upon the exercise hereof.
The Corporation shall not effect any transaction described in this subsection
(b) unless the resulting successor or acquiring entity (if not the Corporation)
assumes by written instrument the obligation to deliver to the Warrantholder
such shares of stock and/or securities as, in accordance with the foregoing
provisions, the Warrantholder may be entitled to purchase. The foregoing
notwithstanding, in the event of a merger or consolidation in which the
Corporation is not the surviving entity, if the
Corporation concludes that it will be unable to satisfy the conditions of this
subsection (b) without a material adverse effect on the terms of such proposed
transaction, then the Corporation shall have the option, prior to or
contemporaneously with the closing of such merger or consolidation, to purchase
the Warrant from the Warrantholder at its then fair value, determined with
regard to both the spread between the Exercise Price and the value of the
consideration to be received in the transaction and the remaining term of the
Warrant. The Corporation and the Warrantholder shall agree on such fair value
or, in the event they are unable to agree, shall submit the question of fair
value to an investment banking firm to be selected by the Corporation, with the
cost of such investment banking firm to be paid by the Corporation.
7. Investment Representation. As a condition to the issuance of Warrant
Shares hereunder, the Warrantholder shall represent to the Corporation that the
Warrant Shares he will acquire pursuant to such exercise are being purchased for
his own account for investment purposes only and not with a present view to
resale or a distribution thereof, unless the Warrantholder delivers to the
Corporation an opinion of counsel acceptable to the Corporation stating that
such a representation is not required under the Act or any state securities
laws. The Warrantholder acknowledges that the Warrant Shares may be "restricted
securities" as defined in the Act and that such Warrant Shares may not be able
to be resold unless such resale is registered under the Act and applicable state
securities laws or unless an exemption is available. The Warrantholder
acknowledges that he has only the rights to cause the registration of the
Warrant Shares as are set forth in that certain Registration Rights Agreement
between the Warrantholder and the Company of even date herewith and that no
additional registration rights are granted hereby.
8. No Rights as a Shareholder. The Warrantholder shall not have any
interest in or shareholder rights with respect to any shares of Common Stock
which are subject to the Warrant until such shares have been issued and
delivered to the Warrantholder in accordance with this Warrant.
9. Taxes. As a condition to the issuance of Warrant Shares hereunder,
the Corporation may withhold, or require the Warrantholder to pay or reimburse
the Corporation for, any taxes which the Corporation determines are required to
be withheld under federal, state or local law in connection with the exercise of
the Warrant.
10. Heirs and Successors. This Warrant and all terms and conditions
hereof shall be binding upon the Corporation and its successors and assigns, and
upon the Warrantholder and his heirs, legatees and legal representatives.
11. Governing Law. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Georgia without regard to
the principles of conflicts of laws.
12. Notices. All notices, requests and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given and received when
delivered in person, when delivered by overnight delivery service, or three (3)
business days after being mailed by registered or certified mail, postage
prepaid, return receipt requested, to the following addresses (or to such other
address as one party may from time to time designate in writing to the other
party hereto):
If to the Corporation: Convergence Systems, Inc.
0000 Xxxxxxx Xxxxxx Xxxx, X.X.
Xxxxx 000
Xxxxxxxx, XX 00000-0000
Attn: President
If to the Warrantholder: _____________________________
_____________________________
_____________________________
13. Entire Agreement. This Agreement and the related Investor Rights
Agreement, Subscription Agreements, investor questionnaires and Amended and
Restated Articles of Incorporation of the Company in the form filed with the
Georgia Secretary of State (collectively, the "Related Documents") constitute
the full and entire agreement and understanding of the parties to this Agreement
with respect to the subjects hereof and thereof, supersede all previous
discussions and agreements, if any, of the parties hereto with respect to the
subject matter of this Agreement and the Related Agreements (including, but not
limited to, all matters set forth in term sheets or business plans of the
Company) and no party shall be liable for or bound in any other manner by any
representations, warranties, covenants or agreements except as specifically set
forth in this Agreement and the Related Documents.
14. Severability. The provisions of this Warrant, and of each separate
section and subsection, are severable, and if any one or more provisions may be
determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions, and any unenforceable provision to the extent enforceable,
shall nevertheless be binding and enforceable.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officer, and the Warrantholder has executed this Warrant,
as of the Issuance Date.
CONVERGENCE SYSTEMS, INC.
By: ________________________________
Xxxxx X. Xxxx
President
WARRANTHOLDER:
By: ________________________________
Name (Print):________________________
EXHIBIT A
NOTICE OF EXERCISE
[DATE]
Convergence Systems, Inc.
0000 Xxxxxxx Xxxxxx Xxxx X.X.
Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000-0000
Attn: President
Re: Exercise of Stock Purchase Warrant
----------------------------------
Dear Sir:
The undersigned, _____________________, pursuant to that certain Stock
Purchase Warrant, dated as of ___________________, 1998, by and between
Convergence Systems, Inc. and the undersigned (the "Warrant"), hereby exercises
the Warrant for the following number of Warrant Shares, subject to the terms and
conditions of the Warrant:
Number of Warrant Shares Being Purchased __________________________
Total Purchase Price and Amount Remitted __________________________
Very truly yours,
_____________________________________
[Name]
