THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED.
SPECTRANET INTERNATIONAL
WARRANT TO PURCHASE SERIES B COMMON STOCK
No. S/E-3 December 30, 1997
This Warrant ("Warrant") entitles Colorado Spectra 2, L.L.C. (the
"Holder"), for value received, to purchase from SpectraNet International, a
California corporation (the "Company") during the period commencing as of the
date hereof and ending on the Expiration Date (as defined in Section 13 herein)
2,110,140 shares of Series B Common Stock, no par value, of the Company (the
"Shares") (subject to adjustment as set forth herein). The per share exercise
price of the Shares subject to this Warrant shall be One Dollar and Eighty Cents
($1.80) per Share (as adjusted, the "Exercise Price").
The Holder of this Warrant agrees with the Company that this Warrant is
issued and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. EXERCISE OF WARRANT. The Holder may exercise this Warrant on any
business day in the State of California prior to or on the Expiration Date as
defined herein, for the full or any lesser number of Shares purchasable
hereunder, by surrendering this Warrant to the Company at its principal office,
together with a duty executed Notice of Exercise (in substantially the form
attached hereto as EXHIBIT A), and payment in cash or by check of the aggregate
Exercise Price then in effect for the number of Shares for which this Warrant is
being exercised. Promptly after such exercise, the Company shall issue and
deliver to the Holder a certificate or certificates representing the number of
Shares issuable upon such exercise. Upon issuances by the Company in accordance
with the terms of this Warrant, all such Shares shall be validly issued, fully
paid and non-assessable, and free from all taxes, liens and encumbrances with
respect to the issuance thereof, except as set forth in the Company's Articles
of Incorporation (as amended and restated, the "Articles") or bylaws and any
applicable restrictions on sale set forth therein or pursuant to federal or
state securities laws and any restrictions on transfer set forth herein or in
that certain Xxxxxxx and Restated Investor Rights Agreement, dated as of the
date of original issuance of this Warrant (the "Original Issue Date") as
amended, supplemented or restated (the "Investor Rights Agreement") or in that
certain Securityholders Agreement dated as of the Original Issue Date (the
"Securityholders Agreement"). To the extent permitted by law, this Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided herein, even if
the Company's stock transfer books are at that time closed, and the holder shall
be treated for all purposes as the holder of record of the Series B Common Stock
to be issued upon such exercise as of the close of business
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on such date. Upon any exercise of this Warrant for fewer than all Shares
represented by this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant in substantially identical form for the remaining
Shares covered hereby.
2. NET ISSUE EXERCISE.
(a) Notwithstanding any provisions herein to the contrary, if the
Quoted Price (as defined in Section 2(b) below) of one Share of the Series B
Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant by payment with cash, or by
certified or cashier's check, the Holder may elect to make a cash-free exercise
of this Warrant and thereby to receive Shares equal to the value (as determined
below) of the portion of this Warrant being canceled by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Notice of Exercise and notice of such election, in which event the
Company shall issue to the Holder a number of Shares computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares of Series B Common Stock to be issued
to the Holder upon the cash-free exercise
Y = the total number of Shares of Series B Common Stock to be
exercised, assuming no cash-free exercise (at the date of
such calculation)
A = the Quoted Price (as defined under Section 2(b) hereof) of
one Share of Series B Common Stock (at the date of such
calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
(b) The "Quoted Price" of the Series B Common Stock is the last
reported sales price of the Series B Common Stock as reported by the Nasdaq
National Market ("NMS"), or the primary national securities exchange on which
the Series B Common Stock is then quoted, PROVIDED, HOWEVER, that if the Series
B Common Stock is neither traded on the NMS nor on a national securities
exchange, the price referred to above shall be the price reflected on Nasdaq, or
if the Series B Common Stock is not then traded on Nasdaq, the price reflected
in the over-the-counter market as reported by the National Quotation Bureau,
Inc. or any organization performing a similar function; and PROVIDED, FURTHER,
that if the Series B Common Stock is not publicly traded, the Quoted Price of
the Series B Common Stock shall be the fair market value as determined in good
faith by the Board of Directors of the Company.
(c) Upon exercise of a portion of this Warrant in accordance with
this Section 2, the number of shares subject to this Warrant shall be reduced by
the number of shares included under "Y" in the calculation described in 2(a)
above.
3. ADJUSTMENT OF EXERCISE PRICE AND WARRANT SHARES.
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The Exercise Price and the number of Shares subject to this Warrant shall
be subject to adjustment from time to time as follows:
3.1 SUBDIVISION OR COMBINATION OF STOCK.
(a) If at any time or from time to time after the Original Issue Date
the Company shall subdivide (by stock split, stock dividend, or otherwise) its
outstanding shares of Common Stock, the Exercise Price in effect immediately
prior to such subdivision shall, concurrently with the effectiveness of such
subdivision, be proportionately decreased. In the event the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price
then in effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(b) Upon each adjustment of the Exercise Price as provided in Section
3.1(a), the Holder thereafter shall be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of Shares of Series B Common
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
3.2 MINIMAL ADJUSTMENTS. No adjustment in the Exercise Price and/or
the number of Shares subject to this Warrant shall be made if such adjustment
would result in a change in (i) the Exercise Price of less than one cent ($0.01)
per share or (ii) the number of Shares represented by this Warrant of less than
one share (the "Adjustment Threshold Amount"). Any adjustment not made because
the Adjustment Threshold Amount is not satisfied shall be carried forward and
made, together with any subsequent adjustments, at such time as (a) the
aggregate amount of all such adjustments is equal to at least the Adjustment
Threshold Amount or (b) this Warrant is exercised.
3.3 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 3, the
Company promptly shall compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based.
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3.4 REORGANIZATION OF COMPANY. Subject to Section 13 hereof, if the
Company consolidates or merges with or into, any person, upon consummation of
such transaction the Warrant shall automatically become exercisable for the kind
and amount of securities, cash or other assets which the Holder would have owned
immediately after the consolidation or merger, if the Holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, shall
enter into a supplemental Warrant so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section.
4. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a shareholder of
the Company on any matters or with respect to any rights whatsoever as a
shareholder of the Company. No dividends or interest shall be payable or
accrued in respect of this Warrant or the interest represented hereby or the
shares of Series B Common Stock purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised in accordance with its
terms.
5. NO IMPAIRMENT. The Company will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but shall at all times in good faith assist in effecting the terms of
this Warrant and in taking all actions necessary or appropriate in order to
protect the rights of the Holder against dilution or other impairment of its
rights hereunder.
6. NO FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. In lieu of issuing any fractional share, the
Company shall pay the Holder entitled to such fraction a sum in cash equal to
the fair market value of such fraction on the date of exercise.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company
covenants and agrees that during the period of time during which this Warrant is
exercisable, it will at all times have authorized and reserved solely for
issuance and delivery upon the exercise of this Warrant, all such Shares of
Series B Common Stock and other stock, securities and property as from time to
time are receivable upon the exercise of this Warrant. If at any time the
number of authorized but unissued Shares of Series B Common Stock shall not be
sufficient to effect the exercise of this Warrant, the Company will use its best
efforts to take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued Shares of Series B Common
Stock to such number of shares as shall be sufficient for such purposes. The
Company further covenants that all Shares issuable upon exercise of this Warrant
and payment of the Exercise Price, all as set forth herein, will be free from
all taxes, liens and charges in respect of the issue of such shares (other than
taxes in respect of any transfer occurring contemporaneously with such exercise
and payment or otherwise specified herein). The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for Shares of Series B Common Stock upon the exercise of
this Warrant and covenants that all such Shares, when issued, sold and delivered
in accordance with the terms of
4
this Warrant for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer set forth in this Warrant, the
Investor Rights Agreement, the Securityholders Agreement and applicable state
and federal securities laws.
8. ISSUE TAX. The issuance of certificates for shares of Series B Common
Stock upon the exercise of this Warrant shall be made without charge to the
Holder of this Warrant for any issue tax (other than applicable income taxes) in
respect thereof, provided, however, that the Company shall not be required to
pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of this Warrant being exercised.
9. TRANSFER RESTRICTIONS. This Warrant may be transferred only in whole.
Any transfer of this Warrant permitted under this Section 9 shall be made only
upon surrender for exchange of this Warrant (in negotiable form, if not
surrendered by the Holder named on the face hereof) to the Company at its
principal office, in which event the Company will issue and deliver a new
Warrant or Warrants in substantially identical form representing, in the
aggregate, the same number of Shares of Series B Common Stock, in the
denomination or denominations requested, to or on the order of such Holder upon
payment by such Holder of any applicable transfer taxes; and provided further
that all reasonable expenses incurred in connection with such re-issuance and
delivery shall be borne by the Holder. The terms of this Warrant shall be
binding upon the executors, administrators, heirs, successors and assigns of the
Holder.
10. REPLACEMENT OF WARRANT. Upon 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) upon delivery of
an indemnity agreement in such reasonable amount as the Company may determine,
or (in the case of mutilation) upon surrender and cancellation hereof, the
Company, at its expense, shall issue a new Warrant in substantially identical
form in replacement hereof.
11. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed
(a) if to the Holder, at the Holder's address set forth on the signature page of
this Warrant, or at such other address as the Holder shall have furnished to the
Company in writing or (b) if to any other Holder of any of the Shares, at such
address as such Holder shall have furnished the Company in writing, or, until
any such Holder so furnishes an address to the Company, then to and at the
address of the last Holder of such Shares who has so furnished an address to the
Company or (c) if to the Company, to its address as set forth on the signature
page of this Warrant and addressed to the attention of the Corporate Secretary,
or at such other address as the Company shall have furnished to the Holder.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by messenger, or, if sent by mail, at the earlier of its
receipt or 3 days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
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12. GOVERNING LAW. This Warrant shall be construed in accordance with and
governed by the laws of the State of California.
13. EXPIRATION DATE. This Warrant will be wholly void and of no effect
after 5:00 p.m. (California time) on January 31, 2002 (the "Expiration Date");
provided that, if the last day on which this Warrant may be exercised is a
Saturday, Sunday or a legal holiday or a day on which banking institutions doing
business in the City and County of San Diego are authorized by law to close,
this Warrant may be exercised prior to 5:00 p.m. (San Diego time) on the next
full business day with the same force and effect as if exercised on such last
day specified herein.
14. MODIFICATION AND WAIVER. Neither this Warrant nor any term hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
15. HEADINGS. The descriptive headings in this Warrant are included for
convenience only, and do not constitute a part hereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered on the date first set forth above.
SPECTRANET INTERNATIONAL
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
By:/s/ Xxxxxx X. Xxxx
------------------------------------------
Xxxxxx X. Xxxx
President and Chief Executive Officer
ACCEPTED AND AGREED:
COLORADO SPECTRA 2, L.L.C.
0000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
By:/s/ Xxxxxx X. Xxxxx
------------------------------------------
Xxxxxx X. Xxxxx
Manager
[Warrant signature page]
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EXHIBIT A
NOTICE OF EXERCISE
(To be signed only upon exercise of Warrant)
To: SpectraNet International
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Attn.: Secretary
The undersigned, Holder of the attached Warrant, hereby irrevocably elects
to exercise the purchase right represented by this Warrant as follows:
[ ] The undersigned elects to purchase for cash or check _________ full shares
of Series B Common Stock of SpectraNet International and herewith makes
payment of $_________ for those shares;
[ ] The undersigned elects to effect a net exercise of this Warrant, exercising
this Warrant [ ] in full or [ ] as to the following GROSS number of shares:
__________. The undersigned understands that the actual number of shares
issuable will be determined in accordance with Sections 1, 2 and 3 of this
Warrant.
The undersigned requests that the certificates for the shares be issued in
the name of, and delivered to _____________________________*, whose address is
____________________.
Dated:________, ________
(Signature must conform in all respects to name of
Xxxxxx as specified on the face of the attached
Warrant.)
---------------------------------------------
Signature
---------------------------------------------
Address
* If the stock is to be issued to anyone other than the registered Holder of
this Warrant, this Notice of Exercise must be accompanied by an opinion of
counsel to the effect that such transfer may be effected without compliance
with the registration and prospective delivery requirements of the
Securities Act of 1933, as amended.
A-1
