Exhibit 10.4
DEFERRED PRICING AGREEMENT
This DEFERRED PRICING AGREEMENT, dated as of January 19, 2001, by and
among Xx0.xxx Inc., a Delaware corporation (the "Company"), and The Travelers
Indemnity Company, a Delaware corporation ("Travelers").
WHEREAS, the parties hereto entered into a letter agreement, dated as of
June 6, 2000 (the "Letter Agreement"), that provided for Travelers to have price
and terms protection on its $10 million investment in Units (as defined in the
Letter Agreement) relative to any other series of investment in the Units; and
WHEREAS, the parties entered into a Preferred Stock Unit Subscription
Agreement, dated as of June 6, 2000 (the "Subscription Agreement") and an
Investor's Rights Agreement, dated as of June 7, 2000 (the "Investors Rights
Agreement"); and
WHEREAS, pursuant to the Subscription Agreement, Travelers invested $10.0
million in Units and received 1,644,304 shares of Series C Preferred Stock (the
"Travelers Preferred Stock"), warrants to purchase 205,538 shares of common
stock of the Company, par value $0.01 per share (the "Common Stock"), at an
exercise price of $8.69 per share and warrants to purchase 205,538 shares of
Common Stock at an exercise price of $10.86 per share (collectively, the
"Travelers Warrants"); and
WHEREAS, on September 29, 2000, certain investors invested $2.45 million
in Units and received 924,527 shares of Series C-II Preferred Stock and warrants
to purchase 369,037 shares of Common Stock at an exercise price of $2.65 per
share; and
WHEREAS, on December 8, 2000, certain investors invested $2.55 million in
Units and received 2,049,839 shares of Series C-III Preferred Stock and warrants
to purchase 635,450 shares of Common Stock at an exercise price of $1.14 per
share; and
WHEREAS, the parties desire to terminate the Letter Agreement upon
execution of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and intending to be legally bound thereby, the parties hereto
hereby agree as follows:
1. Pricing Adjustment.
(a) In full and complete satisfaction and discharge of the Company's
obligations to Travelers under the Letter Agreement, upon the earlier of (i) a
Change of Control (as defined below) or (ii) December 31, 2001, the Company
shall (A) cancel the Travelers Preferred Stock and in its place issue 1,849,057
shares of Series C-IV Preferred Stock, par value $0.01 per share (the "Series
C-IV Preferred Stock"), and 4,099,678 shares of Series C-V Preferred Stock, par
value $0.01 per share (the "Series V Preferred Stock, and, together with the
Series C-IV Preferred Stock, the "New Preferred Stock"), and (B) cancel the
Travelers Warrants and in their
place issue 462,264 warrants with an exercise price of $2.65 (the "C-IV
Warrants") and 1,024,920 warrants with an exercise price of $1.14 (the "C-V
Warrants" and, together with the C-IV Warrants, the "New Warrants").
(b) In order to receive the New Preferred Stock and the New Warrants in
accordance with Section 1(a) hereof, Travelers must surrender the Travelers
Preferred Stock and the Travelers Warrants to the Company for cancellation at
its office at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
place as is designated in writing by the Company.
(c) For purposes of this Agreement, a "Change of Control" shall mean the
first to occur of any of the following events: (i) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities Act of
1933, as amended) other than Travelers and its affiliates, the Company, any
trustee or other fiduciary holding Common Stock under an employee benefit plan
of the Company or a related company, or any corporation which is owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Act of 1933, as amended)
of more than fifty percent (50%) of the then outstanding voting stock of the
Company; (ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company (and
any new director whose election by the Board of Directors or whose nomination
for election by the Company's stockholders was approved by a vote of at least a
majority of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof;
(iii) the merger or consolidation of the Company where the stockholders of the
Company would not, immediately after the merger or consolidation, own at least
fifty percent (50%) of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; (v) the Company files a petition
seeking protection from creditors under applicable bankruptcy laws, or an
involuntary petition is filed under such laws that names the Company as debtor
and has not been dismissed or stayed for a period of 30 days or more; or (vi)
the Company ceases to conduct any business operations.
2. Description of Securities. The Series C-IV Preferred Stock and Series C-V
Preferred Stock shall have the respective rights, preferences and limitations
set forth in the respective Designations of Powers, Preferences and Rights of
Preferred Stock attached hereto as Exhibit A and incorporated herein by
reference. The forms of the C-IV Warrant and the C-V Warrant are attached hereto
as Exhibit B and incorporated herein by reference. The Company agrees that any
adjustment to the conversion price of the New Preferred Stock or to the exercise
price of the New Warrants that is required by the terms of such securities will
be given effect at the time of issuance even though the New Preferred Stock or
New Warrants, as the case may be, were not yet issued and outstanding at the
time of the event triggering such adjustment.
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3. Bring-Down of Representations and Warranties.
(a) With respect to the New Preferred Stock and the New Warrants,
Travelers represents and warrants that the representations and warranties of
Travelers contained in Section 2 of the Subscription Agreement are, and shall
be, true and correct in all material respects on and as of the date hereof and
the date (the "Closing Date") that the New Preferred Stock and the New Warrants
are issued to Travelers, with the same effect as though such representations and
warranties had been made on and as of the date hereof and such Closing Date.
(b) The Company represents and warrants that on each Closing Date, the New
Preferred Stock will be duly authorized, validly issued and outstanding, fully
paid and non-assessable, the New Warrants will be duly authorized, validly
issued and enforceable against the Company in accordance with their terms, and
that no authorizations, approvals or consents will be required for the issuance
or performance of the terms of the New Preferred Stock and the New Warrants by
the Company.
4. Termination of Letter Agreement. The parties hereto acknowledge that
the Letter Agreement is hereby terminated and shall be of no further force or
effect.
5. Further Assurances. Upon the terms and subject to the conditions
contained herein, the parties agree (i) to use all reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement; (ii) to execute any documents, instruments or
conveyances of any kind that may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder; and (iii) to cooperate with
each other in connection with the foregoing.
6. Subscription Agreement and Investor's Rights Agreement. Upon the
issuance thereof, the New Preferred Stock and the New Warrants will constitute
the Units, the Preferred Stock and the Warrants, as applicable, under the
Subscription Agreement and the Investor's Rights Agreement. Other than the
foregoing, all other provisions of the Subscription Agreement and the Investor's
Rights Agreement shall remain in full force and effect.
7. Entire Agreement. This Agreement contains the entire agreement of the
parties and supersedes all other agreements between the parties concerning the
Travelers Preferred Stock, the Travelers Warrant, the New Preferred and the New
Warrant.
8. Modification. This Agreement may only be modified by a written document
signed by both parties.
9. Governing Law and Venue. This Agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to any conflict of law provision. Any legal actions with respect to any matters
arising under this Agreement shall be brought exclusively in a court of
competent jurisdiction in New York, New York.
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10. No Third Party Beneficiaries. This Agreement is not intended to create
any right, claim or remedy in favor of any person or entity, other than the
parties hereto and their respective successors.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed and original, but all of which
together shall constitute one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties named below have caused this Agreement to
be duly executed and delivered as of the date first above written.
XX0.XXX INC.
By: /s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: CFO
THE TRAVELERS INDEMNITY COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
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EXHIBIT A
Exhibit A-1
XX0.XXX INC.
---------------------------
DESIGNATION OF
POWERS, PREFERENCES AND RIGHTS OF
SERIES C-IV PREFERRED STOCK,
PAR VALUE $0.01 PER SHARE
---------------------------
Pursuant to Section 151(g) of the Delaware General
Corporation Law
---------------------------
IT IS HEREBY CERTIFIED that:
1. The name of the company (hereinafter called the "Company") is Xx0.xxx
Inc., a corporation organized and now existing under the Delaware General
Corporation Law.
2. The Certificate of Incorporation of the Company (the "Certificate of
Incorporation") authorizes the issuance of Twenty Million (20,000,000) shares of
preferred stock, par value $0.01 per share (the "Preferred Stock"), and
expressly vests in the Board of Directors of the Company the authority to issue
any or all of said shares in one or more series by resolution or resolutions to
establish the designation and number and to fix the relative rights and
preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
151(g) of the Delaware General Corporation Law, has adopted the resolution set
forth below to create a series issue of Preferred Stock. Pursuant to 151(g), the
approval of the Company's shareholders was not required.
RESOLVED, THAT One Million Eight Hundred Forty-Nine Thousand Fifty-Seven
(1,849,057) shares of the Twenty Million (20,000,000) shares of Preferred Stock
of the Company which are authorized shares as of the date of this Certificate
shall hereby be designated Series C-IV Preferred Stock, par value $0.01 per
share, and shall possess the rights and preferences set
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forth below, which shall constitute a new Section 7E to Article IV of the
Certificate of Incorporation:
"Section 7E. Series C-IV Preferred Stock.
1. Designation and Amount. One Million Eight Hundred Forty-Nine
Thousand Fifty-Seven (1,849,057) shares of the Twenty Million (20,000,000)
authorized shares of Preferred Stock of the Company are designated Series C-IV
Preferred Stock (the "Series C-IV Preferred Stock"). The Series C-IV Preferred
Stock shall be issued or offered at a purchase price equal to $2.65 per share
(the "Series C-IV Original Issue Price"). The holders of record of any series of
the Series C-IV Preferred Stock are sometimes referred to in this Section 7E as
the "Series C-IV Holders." The holders of record of any shares of any series of
the Preferred Stock are referred to in this Section 7E as the "Holders."
2. Rank. The Series C-IV Preferred Stock shall rank on parity with
the Company's Series A Preferred Stock, the Company's Series B Preferred Stock
and any other subdivision of the Company's Series C Preferred Stock and shall
accordingly rank (i) junior to any other class or series of capital stock of the
Company hereafter created specifically ranking by its terms senior to the Series
A Preferred Stock, the Series B Preferred Stock, the Series C-IV Preferred Stock
or any other subdivision of the Series C Preferred Stock (the "Senior
Securities"); (ii) prior to all of the Common Stock; (iii) prior to any class or
series of capital stock of the Company hereafter created not specifically
ranking by its terms senior to or on parity with any Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock of whatever subdivision
(collectively, with the Common Stock, the "Junior Securities"); and (iv) on
parity with any class or series of capital stock of the Company hereafter
created specifically ranking by its terms on parity with the Series A Preferred
Stock, the Series B Preferred Stock or any subdivision of the Series C Preferred
Stock (the "Parity Securities") in each case as to distribution of assets upon
any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (all such distributions being referred to collectively as
"Distributions").
3. Liquidation Preference.
(a) In the event of any Distribution, the Series C-IV Holders
shall be entitled to receive, immediately after any distributions to the holders
of the Senior Securities required by the Company's Certificate of Incorporation,
and prior in preference to any distribution to the holders of the Junior
Securities, but in parity with any Distribution to the holders of the Series A
Preferred Stock (the "Series A Holders"), the holders of the Series B Preferred
Stock (the "Series B Holders") or the holders of the Parity Securities, an
amount per share equal to the Original Issue Price. If upon the occurrence of
any such Distribution, and after payment in full of any preferential amounts due
in respect of the Senior Securities, the assets and funds available to be
distributed among the Series A Holders, the Series B Holders, the Series C-IV
Holders and the holders of the Parity Securities shall be insufficient to pay to
such Holders the full preferential amounts due to the Series A Holders, the
Series B Holders, the Series C-IV Holders and holders of the Parity Securities,
then the entire assets and funds of the Company
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legally available for distribution shall be distributed among the Series A
Holders, the Series B Holders, the Series C-IV Holders and the holders of the
Parity Securities, pro rata, based on the respective liquidation amounts to
which each such series of stock is entitled by the Company's Certificate of
Incorporation and any certificate(s) of designation relating thereto.
(b) Upon the completion of the distribution required by
Section 7E.3(a), if assets remain in the Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation, including any duly adopted certificate(s) of designation.
(c) At the option of each Series C-IV Holder, a sale,
conveyance or disposition of all or substantially all the assets of the Company
to any entity other than an Affiliate of the Company which is controlled by the
Company through the direct or indirect ownership of not less than 50% of the
voting securities or interests thereof (a "Liquidating Transaction") shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 7E.3; provided, that neither (i) any Liquidating Transaction that a
Series C-IV Holder elects in writing not to treat as a liquidation, dissolution
or winding up of the Company nor (ii) any consolidation, merger, acquisition, or
other business combination of the Company with or into any other company or
companies shall be treated as a liquidation, dissolution or winding up within
the meaning of this Section 7E.3(c), but instead shall be subject to Section
7E.4(f). Any Series C-IV Holder as to which any Liquidating Transaction is
treated as a liquidation, dissolution or winding up of the Company under this
Section 7E.3(c) is referred to herein as a "Series C-IV Liquidating Holder."
(d) Prior to the closing of a transaction described in Section
7E.3(c) which would constitute a liquidation event, the Company shall either (i)
make all cash distributions it is required to make to the Series C-IV
Liquidating Holders pursuant to the first sentence of Section 7E.3(a), (ii) set
aside sufficient funds from which the cash distributions required to be made to
the Series C-IV Liquidating Holders can be made, or (iii) establish an escrow or
other similar arrangement with a third party pursuant to which the proceeds
payable to the Company from a sale of all or substantially all the assets of the
Company will be used to make the liquidating payments to the Series C-IV
Liquidating Holders immediately after the consummation of such sale. If the
Company has not fully complied with any of the foregoing alternatives, the
Company shall either: (x) cause such closing to be postponed until such cash
distributions have been made, or (y) cancel such transaction, in which event the
rights of the Series C-IV Holders or other arrangements shall be the same as
existing immediately prior to such proposed transaction.
4. Conversion. The holders of Series C-IV Preferred Stock have
conversion rights (the "Conversion Rights") as follows:
(a) Right to Convert. Each share of Series C-IV Preferred
Stock shall be convertible without the payment of any additional consideration
at the option of the Series C-IV Holder thereof, at any time after the date of
issuance of such shares of Series C-IV Preferred
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Stock, at the office of the Company or any transfer agent for the Series C-IV
Preferred Stock into the number of fully paid and nonassessable shares of Common
Stock which results from dividing the Series C-IV Original Issue Price by the
conversion value per share in effect for each share of Series C-IV Preferred
Stock (the "Series C-IV Conversion Value") at the time of conversion. The Series
C-IV Conversion Value shall initially be equal to the Series C-IV Original Issue
Price and shall be adjusted from time to time pursuant to the provisions of
Section 7E.4(d) and Section 7E.4(e) and shall be subject to adjustment from time
to time as provided below. The number of shares of Common Stock into which a
share of Series C-IV Preferred Stock is convertible is hereinafter referred to
as the "Series C-IV Conversion Rate."
(b) Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued
upon conversion of Series C-IV Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Company shall pay cash
equal to such fraction multiplied by the then effective Series C-IV Conversion
Value. Before any holder of Series C-IV Preferred Stock shall be entitled to
convert such shares into full shares of Common Stock and to receive certificates
therefor, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Company or of any transfer agent for the
Series C-IV Preferred Stock, as the case may be, and shall give written notice
to the Company at such office that such holder elects to convert the same; the
Company shall, as soon as practicable thereafter, issue and deliver at such
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to such holder in the amount of any cash amounts payable as the result
of a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series C-IV Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(ii) The Company shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Series C-IV Preferred Stock pursuant
to this Section 7E.4. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involving the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of Series C-IV Preferred Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person or entity
requesting such issuance has paid to the Company the amount of any tax or has
established, to the satisfaction of the Company, that such tax has been paid.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series C-IV Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series C-IV Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the
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conversion of all then outstanding shares of Series C-IV Preferred Stock, the
Company shall take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes.
(d) Adjustments to Series C-IV Conversion Value for Dilutive
Issuances.
(i) No Adjustment of Conversion Price. No adjustment in
the Series C-IV Conversion Value shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the Company is
less than the Series C-IV Conversion Value as measured at the date of the
issuance of the Additional Shares of Common Stock. No adjustment in the Series
C-IV Conversion Value shall be made pursuant to Section 7E.4(d) as a result of
any stock dividend or subdivision which causes an adjustment in the Series C-IV
Conversion Value pursuant to Section 7E.4(e) or any event which is subject to
the provisions of Section 7E.4(f). No adjustment in the Series C-IV Conversion
Value shall be made in respect of an issuance or deemed issuance of Additional
Shares of Common Stock if such issuance or deemed issuance involves the issuance
or deemed issuance of stock, options or warrants (A) to employees, consultants
or directors of the Company, (B) to other entities for acquisition purposes, (C)
to banks or other institutional credit financing sources, or (D) the issuance of
Common Stock upon conversion or redemption of any shares of any convertible
series of the company's Preferred Stock; in the case of each of (A), (B) or (C)
pursuant to plans or arrangements approved by the Board of Directors.
(ii) Deemed Issuance of Additional Shares of Common
Stock. If the Company at any time or from time to time after September 8, 2000
shall issue any Options or Convertible Securities or shall fix a record date for
the determination of holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; provided, that Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 7E.4(d)(iv)) of such Additional Shares
of Common Stock would be less than the Series C-IV Conversion Value in effect on
the date of and immediately prior to such issue (or with respect to any issues
made prior to the date hereof, the Series C-IV Conversion Value that would have
been in effect as of such date), or such record date, as the case may be; and
provided, further, that in any case in which Additional Shares of Common Stock
are deemed to be issued:
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(A) no further adjustment in the Series C-IV
Conversion Value shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series C-IV Conversion Value computed upon
the original issue of such Options or Convertible Securities (or upon the
occurrence of a record date with respect to the issuance of such Options or
Convertible Securities), and any subsequent adjustments based thereon shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities; and
(C) on the expiration or cancellation of any
Options or the termination of the right to convert or exchange any Convertible
Securities which shall have not been exercised, if the Series C-IV Conversion
Value shall have been adjusted upon the original issuance of such Options or
Convertible Securities or shall have been subsequently adjusted pursuant to
clause (B) above, the Series C Conversion Value shall be recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Company for the issuance of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, if any, or
for the issuance of all such Convertible Securities, whether or not actually
converted or exchanged, plus the consideration actually received by the Company
upon such conversion or exchange, if any; and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise of such Options were issued at the time of issuance of such Options and
the consideration received by the Company for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Company for the issuance of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Company upon the issuance
of the Convertible Securities with respect to which such Options were actually
exercised;
(D) no readjustment pursuant to clauses (B) and
(C) above shall have the effect of increasing the Series C-IV Conversion Value
to an amount which exceeds the higher of (i) the Series C-IV Issue Price and
(ii) the Series C Conversion Value that would have resulted from any issuance of
Additional Shares of Common Stock between September 8, 2000 and the date of such
readjustment.
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(iii) Adjustment of Series C Conversion Value Upon
Issuance of Additional Shares of Common Stock. If at any time after September 8,
2000 the Company shall issue (or shall have issued in the case of issuances
after September 8, 2000 but prior to the date hereof) Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 7E.4(d)(ii)) without consideration or for a consideration
per share less than the Series C-IV Conversion Value in effect on the date of
and immediately prior to such issuance, then and in such event, the Series C-IV
Conversion Value shall be reduced, concurrently with such issuance, to a price
(calculated to the nearest one cent) determined by dividing (A) an amount equal
to the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such issue (determined on a fully-diluted basis; i.e. treating as
outstanding all shares of Common Stock issuable upon exercise, exchange or
conversion of all outstanding options (to the extent then vested or
exercisable), warrants or other securities exercisable or exchangeable for or
convertible into, directly or indirectly, shares of Common Stock) multiplied by
the then existing Series C-IV Conversion Value, plus (y) the consideration, if
any, received by the Company (or deemed to have been received by the Company)
upon such issue of Additional Shares of Common Stock, by (B) the sum of the
number of shares of the Company's issued and outstanding Common Stock on a
fully-diluted basis immediately before the issuance of such Additional Shares of
Common Stock plus the number of shares of Additional Shares of Common Stock that
were issued (or deemed to have been issued). Notwithstanding the foregoing
provisions of this Section, if the operation of the foregoing provisions shall
result in a new Series C-IV Conversion Value which is less than or equal to the
price paid or deemed to have been paid for such Additional Shares of Common
Stock (the "Additional Shares Issue Price"), then the new Series C-IV Conversion
Value shall be the amount which is $0.01 more than the Additional Shares Issue
Price. If such Additional Shares of Common Stock are issued for no
consideration, then the Additional Shares Issue Price shall be deemed to be
$0.01.
(iv) Determination of Consideration. For purposes of
this Section 7E.4(d), the consideration received by the Company for the issuance
of any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company;
(2) insofar as it consists of securities (i)
if the securities are then traded on a national securities exchange or the
NASDAQ Stock Market (or a similar national quotation system), then the value
shall be computed based on the average of the closing prices of the securities
on such exchange or system over the 30-day period ending three days prior to
receipt of such securities by the Company, (ii) if the securities are actively
traded over-the-counter, then the value shall be computed based on the average
of the closing bid prices over the 30-day period ending three days prior to the
receipt of such securities by the Company, and (iii) if there is no active
public market, then the value shall be computed based on the fair market
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value thereof on the date of receipt of such securities by the Company, as
determined in good faith by the Board of Directors;
(3) insofar as it consists of property other
than cash and securities, be computed at the fair market value thereof at the
time of such issuance, as determined in good faith by the Board of Directors;
and
(4) if Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received for such Additional Shares of Common Stock, computed as provided in
clauses (A)(1), (A)(2) and (A)(3) of this Section 7E.4(d)(iv), in each case as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 7E.4(d)(ii), relating to
Options and Convertible Securities, shall be determined by dividing
(1) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or, in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(2) the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(e) Adjustment to the Conversion Rate due to Stock Split, Stock
Dividend or Other Similar Event. If, prior to the conversion of all the Series
C-IV Preferred Stock, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend or other similar event, the Series
C-IV Conversion Value shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Series C-IV Conversion
Value shall be proportionately increased.
(f) Adjustment Due to Consolidation, Merger, Exchange of Shares,
Recapitalization, Reorganization or Other Similar Event. If, prior to the
conversion of all the Series C-IV Preferred Stock, (i) there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event, as a result of which shares of Common Stock of the Company
shall be changed into the same or a different number of shares of the same
13
or another class or classes of stock or securities of the Company or another
entity, or (ii) there occurs a sale of all or substantially all of the Company's
assets that is not deemed to be a liquidation, dissolution or winding up of the
Company pursuant to Section 7E.3(c), then the Series C-IV Holders thereafter
shall have the right to receive upon conversion of the shares of Series C-IV
Preferred Stock held by them, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities and/or other assets
which the Series C-IV Holders would have been entitled to receive in such
transaction had the Series C-IV Preferred Stock been converted immediately prior
to such transaction, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Series C-IV Holders to the end
that the provisions hereof (including, without limitation, provisions for the
adjustment of the Series C-IV Conversion Value and the Series C-IV Conversion
Rate shall thereafter be applicable, as nearly as may be practicable in relation
to any securities thereafter deliverable upon the exercise hereof.
(g) Certificates as to Adjustments. Upon each adjustment or
readjustment of the Series C-IV Conversion Value pursuant to Sections 7E.4(d),
(e) and (f) above, and upon the initial issue of Series C-IV Preferred Stock, if
any adjustment or readjustment would have occurred prior thereto (but after
September 8, 2000) pursuant to the terms hereof, the Company at its expense
promptly shall compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series C-IV Preferred
Stock a certificate of the Chief Financial Officer of the Company setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of any holder of Series C-IV Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the then effective Series C-IV Conversion Value, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of each share
of such Series C-IV Preferred Stock.
(h) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
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 hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 7E and in
the taking of all such action as may be necessary or appropriate to protect the
Conversion Rights against impairment.
(i) Definitions. As used in this Section 7E, the following terms
shall have the following meanings:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued (or, pursuant to Section 7E.4(d)(ii), deemed to be issued) by the
Company after September 8, 2000, other than shares of Common Stock issued or
issuable:
14
(i) upon conversion of shares of Series C-IV Preferred Stock;
(ii) to officers, directors or employees of, or financial
advisors or other consultants to, the Company pursuant to a Plan or Plans or
pursuant to any acquisition, financing or other written agreement so long as any
such Plan or written agreement has been approved by the Board of Directors
(including at least one of the members of the Board of Directors designated by
the holders of the Series C-IV Preferred Stock while such holders have the right
to designate one or more directors); and
(iii) as a dividend or distribution on Series C-IV Preferred
Stock.
"Affiliate" shall have the meaning given such term in Rule 405
promulgated under the Securities Act.
"Common Stock" shall mean the common stock, no par value, of the
Company.
"Conversion Rights" shall mean the rights to convert Series C-IV
Preferred Stock into Common Stock as provided in this Section 7E.
"Convertible Securities" shall mean any evidences of indebtedness,
shares (other than Common Stock or Series C-IV Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.
"Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
"Original Issue Date" shall mean _____, 200_ [to be the date the
Series C-IV Preferred Stock is issued].
"Original Purchase Price" shall mean the original purchase price of
$2.65 per share for each share of Series C-IV Preferred Stock, as such amount
shall be adjusted for all stock splits, combinations, consolidations, stock
distributions, stock dividends or other recapitalization transactions involving
the Series C-IV Preferred Stock.
"Plan" shall mean a written stock grant, option plan or purchase
plan or other employee stock incentive program.
"Preferred Stock" shall mean the preferred stock, par value $.01 per
share, of the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series C-IV Conversion Rate" shall mean the number of shares of
Common Stock into which a share of Series C-IV Preferred Stock is convertible.
15
"Series C-IV Conversion Value" shall have the meaning given such
term in Section 7E.4(a).
"Series C-IV Preferred Stock" shall mean those authorized shares of
Preferred Stock of the Company designated as "Series C-IV Preferred Stock", par
value $0.01 per share.
5. Optional Redemption of Series C-IV Preferred Stock. The Company may, at
any time after ______, 200_ [Three years from issue date], and from time to
time, call for redemption and repurchase of any and all shares of Series C-IV
Preferred Stock for a purchase price per share equal to the Series C-IV Original
Issue Price. The Company shall give written notice via certified mail, and any
Series C-IV Holder shall have the right to convert the shares of Series C-IV
Preferred Stock held by it at any time prior to the payment date specified in
such notice. Any such redemption and repurchase shall be made from funds legally
available for such purpose and which are not otherwise restricted.
6. Voting Rights. The Series C-IV Holders shall have no voting power
whatsoever except to the extent otherwise expressly provided by the Delaware
General Corporation Law, and no Series C-IV Holder shall vote or otherwise
participate in any proceeding in which actions shall be taken by the Company or
the stockholders thereof or be entitled to notification as to any meeting of the
stockholders.
7. Protective Provision. So long as shares of Series C-IV Preferred Stock
are outstanding, the Company shall not without first obtaining the approval (by
vote or written consent, as provided by the Delaware General Corporation Law) of
the holders of at least a majority of the then outstanding shares of Series C-IV
Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series C-IV Preferred Stock, including, but not limited to, the creation or
authorization of any Senior Securities.
(b) increase the size of the authorized number of Series C-IV
Preferred Stock; or
(c) do any act or thing not authorized or contemplated by this
Certificate of Incorporation which would result in taxation of the Series C-IV
Holders under Section 305 of the Internal Revenue Code of 1986, as amended (or
any comparable provision of the Internal Revenue Code as hereafter from time to
time amended).
If the holders of a majority of the then outstanding shares of Series C-IV
Preferred Stock agree to allow the Company to alter or change the rights,
preferences or privileges of the shares of Series C-IV Preferred Stock, pursuant
to Subsection (a) above, so as to affect adversely the Series C-IV Preferred
Stock, then the Company will deliver notice of such approved alteration or
change to the Series C-IV Holders that did not agree to such alteration or
change (the "Series C-IV Dissenting Holders"), and the Series C-IV Dissenting
Holders shall thereafter have the right for a period of 30 days to convert
pursuant to the terms of this Certificate of Incorporation as
16
they exist prior to such alteration or change or continue to hold their shares
of Series C-IV Preferred Stock subject to the approved alteration or change of
the rights, preferences or privileges of the Series C-IV Preferred Stock.
8. Status of Converted Stock. In the event any shares of Series C-IV
Preferred Stock shall be converted pursuant to Section 7E.4, the shares so
converted shall be canceled, shall return to the status of authorized but
unissued preferred stock of no designated series, and shall not be issuable by
the Company as Series C-IV Preferred Stock.
9. Preference Rights. Nothing contained herein shall be construed to
prevent the Board of Directors of the Company from issuing one or more series of
preferred stock with dividend and/or liquidation preferences on parity with or
junior to the dividend and liquidation preferences of the Series C-IV Preferred
Stock.
17
IN WITNESS WHEREOF, this Certificate of Designations have been duly
adopted by the Board of Directors of the Company and have been duly executed on
behalf of the Company by its Secretary this ____ day of _____, 200_.
XX0.XXX INC.
By: _____________________________________
Secretary
Attestation:
_________________________
Name:
18
Exhibit A-2
XX0.XXX INC.
---------------------------
DESIGNATION OF
POWERS, PREFERENCES AND RIGHTS OF
SERIES C-V PREFERRED STOCK,
PAR VALUE $0.01 PER SHARE
---------------------------
Pursuant to Section 151(g) of the Delaware General
Corporation Law
---------------------------
IT IS HEREBY CERTIFIED that:
1. The name of the company (hereinafter called the "Company") is Xx0.xxx
Inc., a corporation organized and now existing under the Delaware General
Corporation Law.
2. The Certificate of Incorporation of the Company (the "Certificate of
Incorporation") authorizes the issuance of Twenty Million (20,000,000) shares of
preferred stock, par value $0.01 per share (the "Preferred Stock"), and
expressly vests in the Board of Directors of the Company the authority to issue
any or all of said shares in one or more series by resolution or resolutions to
establish the designation and number and to fix the relative rights and
preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
151(g) of the Delaware General Corporation Law, has adopted the resolution set
forth below to create a series issue of Preferred Stock. Pursuant to 151(g), the
approval of the Company's shareholders was not required.
RESOLVED, THAT Four Million Ninety-Nine Thousand Six Hundred Seventy-Eight
(4,099,678) shares of the Twenty Million (20,000,000) shares of Preferred Stock
of the Company which are authorized shares as of the date of this Certificate
shall hereby be designated Series C-V Preferred Stock, par value $0.01 per
share, and shall possess the rights and preferences set forth below, which shall
constitute a new Section 7F to Article IV of the Certificate of Incorporation:
19
"Section 7F. Series C-V Preferred Stock.
1. Designation and Amount. Four Million Ninety-Nine Thousand Six
Hundred Seventy-Eight (4,099,678) shares of the Twenty Million (20,000,000)
authorized shares of Preferred Stock of the Company are designated Series C-V
Preferred Stock (the "Series C-V Preferred Stock"). The Series C-V Preferred
Stock shall be issued or offered at a purchase price equal to $1.24 per share
(the "Series C-V Original Issue Price"). The holders of record of any series of
the Series C-V Preferred Stock are sometimes referred to in this Section 7F as
the "Series C-V Holders." The holders of record of any shares of any series of
the Preferred Stock are referred to in this Section 7F as the "Holders."
2. Rank. The Series C-V Preferred Stock shall rank on parity with
the Company's Series A Preferred Stock, the Company's Series B Preferred Stock
and any other subdivision of the Company's Series C Preferred Stock and shall
accordingly rank (i) junior to any other class or series of capital stock of the
Company hereafter created specifically ranking by its terms senior to the Series
A Preferred Stock, the Series B Preferred Stock, the Series C-V Preferred Stock
or any other subdivision of the Series C Preferred Stock (the "Senior
Securities"); (ii) prior to all of the Common Stock; (iii) prior to any class or
series of capital stock of the Company hereafter created not specifically
ranking by its terms senior to or on parity with any Series A Preferred Stock,
Series B Preferred Stock or Series CPreferred Stock of whatever subdivision
(collectively, with the Common Stock, the "Junior Securities"); and (iv) on
parity with any class or series of capital stock of the Company hereafter
created specifically ranking by its terms on parity with the Series A Preferred
Stock, the Series B Preferred Stock or any subdivision of the Series C Preferred
Stock (the "Parity Securities") in each case as to distribution of assets upon
any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (all such distributions being referred to collectively as
"Distributions").
3. Liquidation Preference.
(a) In the event of any Distribution, the Series C-V Holders
shall be entitled to receive, immediately after any distributions to the holders
of the Senior Securities required by the Company's Certificate of Incorporation,
and prior in preference to any distribution to the holders of the Junior
Securities, but in parity with any Distribution to the holders of the Series A
Preferred Stock (the "Series A Holders"), the holders of the Series B Preferred
Stock (the "Series B Holders") or the holders of the Parity Securities, an
amount per share equal to the Original Issue Price. If upon the occurrence of
any such Distribution, and after payment in full of any preferential amounts due
in respect of the Senior Securities, the assets and funds available to be
distributed among the Series A Holders, the Series B Holders, the Series C-V
Holders and the holders of the Parity Securities shall be insufficient to pay to
such Holders the full preferential amounts due to the Series A Holders, the
Series B Holders, the Series C-V Holders and holders of the Parity Securities,
then the entire assets and funds of the Company legally available for
distribution shall be distributed among the Series A Holders, the Series B
Holders, the Series C-V Holders and the holders of the Parity Securities, pro
rata, based on the
20
respective liquidation amounts to which each such series of stock is entitled by
the Company's Certificate of Incorporation and any certificate(s) of designation
relating thereto.
(b) Upon the completion of the distribution required by
Section 7F.3(a), if assets remain in the Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation, including any duly adopted certificate(s) of designation.
(c) At the option of each Series C-V Holder, a sale,
conveyance or disposition of all or substantially all the assets of the Company
to any entity other than an Affiliate of the Company which is controlled by the
Company through the direct or indirect ownership of not less than 50% of the
voting securities or interests thereof (a "Liquidating Transaction") shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 7F.3; provided, that neither (i) any Liquidating Transaction that a
Series C-V Holder elects in writing not to treat as a liquidation, dissolution
or winding up of the Company nor (ii) any consolidation, merger, acquisition, or
other business combination of the Company with or into any other company or
companies shall be treated as a liquidation, dissolution or winding up within
the meaning of this Section 7F.3(c), but instead shall be subject to Section
7F.4(f). Any Series C-V Holder as to which any Liquidating Transaction is
treated as a liquidation, dissolution or winding up of the Company under this
Section 7F.3(c) is referred to herein as a "Series C-V Liquidating Holder."
(d) Prior to the closing of a transaction described in Section
7F.3(c) which would constitute a liquidation event, the Company shall either (i)
make all cash distributions it is required to make to the Series C-V Liquidating
Holders pursuant to the first sentence of Section 7F.3(a), (ii) set aside
sufficient funds from which the cash distributions required to be made to the
Series C-V Liquidating Holders can be made, or (iii) establish an escrow or
other similar arrangement with a third party pursuant to which the proceeds
payable to the Company from a sale of all or substantially all the assets of the
Company will be used to make the liquidating payments to the Series C-V
Liquidating Holders immediately after the consummation of such sale. If the
Company has not fully complied with any of the foregoing alternatives, the
Company shall either: (x) cause such closing to be postponed until such cash
distributions have been made, or (y) cancel such transaction, in which event the
rights of the Series C-V Holders or other arrangements shall be the same as
existing immediately prior to such proposed transaction.
4. Conversion. The holders of Series C-V Preferred Stock have
conversion rights (the "Conversion Rights") as follows:
(f) Right to Convert. Each share of Series C-V Preferred Stock
shall be convertible without the payment of any additional consideration at the
option of the Series C-V Holder thereof, at any time after the date of issuance
of such shares of Series C-V Preferred Stock, at the office of the Company or
any transfer agent for the Series C-V Preferred Stock into the number of fully
paid and nonassessable shares of Common Stock which results from dividing
21
the Series C-V Original Issue Price by the conversion value per share in effect
for each share of Series C-V Preferred Stock (the "Series C-V Conversion Value")
at the time of conversion. The Series C-V Conversion Value shall initially be
equal to the Series C-V Original Issue Price and shall be adjusted from time to
time pursuant to the provisions of Section 7F.4(d) and Section 7F.4(e) and shall
be subject to adjustment from time to time as provided below. The number of
shares of Common Stock into which a share of Series C-V Preferred Stock is
convertible is hereinafter referred to as the "Series C-V Conversion Rate."
(g) Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued
upon conversion of Series C-V Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Company shall pay cash
equal to such fraction multiplied by the then effective Series C-V Conversion
Value. Before any holder of Series C-V Preferred Stock shall be entitled to
convert such shares into full shares of Common Stock and to receive certificates
therefor, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Company or of any transfer agent for the
Series C-V Preferred Stock, as the case may be, and shall give written notice to
the Company at such office that such holder elects to convert the same; the
Company shall, as soon as practicable thereafter, issue and deliver at such
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to such holder in the amount of any cash amounts payable as the result
of a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series C-V Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(ii) The Company shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Series C-V Preferred Stock pursuant to
this Section 7F.4. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involving the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of Series C-V Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Company the amount of any tax or has established, to
the satisfaction of the Company, that such tax has been paid.
(h) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series C-V Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series C-V Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the
22
conversion of all then outstanding shares of Series C-V Preferred Stock, the
Company shall take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes.
(i) Adjustments to Series C-V Conversion Value for Dilutive
Issuances.
(i) No Adjustment of Conversion Price. No adjustment in
the Series C-V Conversion Value shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the Company is
less than the Series C-V Conversion Value as measured at the date of the
issuance of the Additional Shares of Common Stock. No adjustment in the Series
C-V Conversion Value shall be made pursuant to Section 7F.4(d) as a result of
any stock dividend or subdivision which causes an adjustment in the Series C-V
Conversion Value pursuant to Section 7F.4(e) or any event which is subject to
the provisions of Section 7F.4(f). No adjustment in the Series C-V Conversion
Value shall be made in respect of an issuance or deemed issuance of Additional
Shares of Common Stock if such issuance or deemed issuance involves the issuance
or deemed issuance of stock, options or warrants (A) to employees, consultants
or directors of the Company, (B) to other entities for acquisition purposes, (C)
to banks or other institutional credit financing sources, or (D) the issuance of
Common Stock upon conversion or redemption of any shares of any convertible
series of the company's Preferred Stock; in the case of each of (A), (B) or (C)
pursuant to plans or arrangements approved by the Board of Directors.
(ii) Deemed Issuance of Additional Shares of Common
Stock. If the Company at any time or from time to time after September 8, 2000
shall issue any Options or Convertible Securities or shall fix a record date for
the determination of holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; provided, that Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 7F.4(d)(iv)) of such Additional Shares
of Common Stock would be less than the Series C-V Conversion Value in effect on
the date of and immediately prior to such issue (or with respect to any issues
made prior to the date hereof, the Series C-V Conversion Value that would have
been in effect as of such date), or such record date, as the case may be; and
provided, further, that in any case in which Additional Shares of Common Stock
are deemed to be issued:
23
(A) no further adjustment in the Series C-V
Conversion Value shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series C-V Conversion Value computed upon
the original issue of such Options or Convertible Securities (or upon the
occurrence of a record date with respect to the issuance of such Options or
Convertible Securities), and any subsequent adjustments based thereon shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities; and
(C) on the expiration or cancellation of any
Options or the termination of the right to convert or exchange any Convertible
Securities which shall have not been exercised, if the Series C-V Conversion
Value shall have been adjusted upon the original issuance of such Options or
Convertible Securities or shall have been subsequently adjusted pursuant to
clause (B) above, the Series C Conversion Value shall be recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Company for the issuance of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, if any, or
for the issuance of all such Convertible Securities, whether or not actually
converted or exchanged, plus the consideration actually received by the Company
upon such conversion or exchange, if any; and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise of such Options were issued at the time of issuance of such Options and
the consideration received by the Company for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Company for the issuance of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Company upon the issuance
of the Convertible Securities with respect to which such Options were actually
exercised;
(D) no readjustment pursuant to clauses (B) and
(C) above shall have the effect of increasing the Series C-V Conversion Value to
an amount which exceeds the higher of (i) the Series C-V Issue Price and (ii)
the Series C Conversion Value that would have resulted from any issuance of
Additional Shares of Common Stock between September 8, 2000 and the date of such
readjustment.
24
(iii) Adjustment of Series C Conversion Value Upon
Issuance of Additional Shares of Common Stock. If at any time after September 8,
2000 the Company shall issue (or shall have issued in the case of issuances
after September 8, 2000 but prior to the date hereof) Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 7F.4(d)(ii)) without consideration or for a consideration
per share less than the Series C-V Conversion Value in effect on the date of and
immediately prior to such issuance, then and in such event, the Series C-V
Conversion Value shall be reduced, concurrently with such issuance, to a price
(calculated to the nearest one cent) determined by dividing (A) an amount equal
to the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such issue (determined on a fully-diluted basis; i.e. treating as
outstanding all shares of Common Stock issuable upon exercise, exchange or
conversion of all outstanding options (to the extent then vested or
exercisable), warrants or other securities exercisable or exchangeable for or
convertible into, directly or indirectly, shares of Common Stock) multiplied by
the then existing Series C-V Conversion Value, plus (y) the consideration, if
any, received by the Company (or deemed to have been received by the Company)
upon such issue of Additional Shares of Common Stock, by (B) the sum of the
number of shares of the Company's issued and outstanding Common Stock on a
fully-diluted basis immediately before the issuance of such Additional Shares of
Common Stock plus the number of shares of Additional Shares of Common Stock that
were issued (or deemed to have been issued). Notwithstanding the foregoing
provisions of this Section, if the operation of the foregoing provisions shall
result in a new Series C-V Conversion Value which is less than or equal to the
price paid or deemed to have been paid for such Additional Shares of Common
Stock (the "Additional Shares Issue Price"), then the new Series C-V Conversion
Value shall be the amount which is $0.01 more than the Additional Shares Issue
Price. If such Additional Shares of Common Stock are issued for no
consideration, then the Additional Shares Issue Price shall be deemed to be
$0.01.
(iv) Determination of Consideration. For purposes of
this Section 7F.4(d), the consideration received by the Company for the issuance
of any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company;
(2) insofar as it consists of securities (i)
if the securities are then traded on a national securities exchange or the
NASDAQ Stock Market (or a similar national quotation system), then the value
shall be computed based on the average of the closing prices of the securities
on such exchange or system over the 30-day period ending three days prior to
receipt of such securities by the Company, (ii) if the securities are actively
traded over-the-counter, then the value shall be computed based on the average
of the closing bid prices over the 30-day period ending three days prior to the
receipt of such securities by the Company, and (iii) if there is no active
public market, then the value shall be computed based on the fair market
25
value thereof on the date of receipt of such securities by the Company, as
determined in good faith by the Board of Directors;
(3) insofar as it consists of property other
than cash and securities, be computed at the fair market value thereof at the
time of such issuance, as determined in good faith by the Board of Directors;
and
(4) if Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received for such Additional Shares of Common Stock, computed as provided in
clauses (A)(1), (A)(2) and (A)(3) of this Section 7F.4(d)(iv), in each case as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 7F.4(d)(ii), relating to
Options and Convertible Securities, shall be determined by dividing
(1) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or, in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(2) the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(j) Adjustment to the Conversion Rate due to Stock Split,
Stock Dividend or Other Similar Event. If, prior to the conversion of all the
Series C-V Preferred Stock, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend or other similar event, the Series
C-V Conversion Value shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Series C-V Conversion
Value shall be proportionately increased.
(f) Adjustment Due to Consolidation, Merger, Exchange of
Shares, Recapitalization, Reorganization or Other Similar Event. If, prior to
the conversion of all the Series C-V Preferred Stock, (i) there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event, as a result of which shares of Common Stock of the Company
shall be changed into the same or a different number of shares of the same
26
or another class or classes of stock or securities of the Company or another
entity, or (ii) there occurs a sale of all or substantially all of the Company's
assets that is not deemed to be a liquidation, dissolution or winding up of the
Company pursuant to Section 7F.3(c), then the Series C-V Holders thereafter
shall have the right to receive upon conversion of the shares of Series C-V
Preferred Stock held by them, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities and/or other assets
which the Series C-V Holders would have been entitled to receive in such
transaction had the Series C-V Preferred Stock been converted immediately prior
to such transaction, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Series C-V Holders to the end
that the provisions hereof (including, without limitation, provisions for the
adjustment of the Series C-V Conversion Value and the Series C-V Conversion Rate
shall thereafter be applicable, as nearly as may be practicable in relation to
any securities thereafter deliverable upon the exercise hereof.
(g) Certificates as to Adjustments. Upon each adjustment or
readjustment of the Series C-V Conversion Value pursuant to Sections 7F.4(d),
(e) and (f) above, and upon the initial issue of Series C-V Preferred Stock, if
any adjustment or readjustment would have occurred prior thereto (but after
September 8, 2000) pursuant to the terms hereof, the Company at its expense
promptly shall compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series C-V Preferred
Stock a certificate of the Chief Financial Officer of the Company setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of any holder of Series C-V Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the then effective Series C-V Conversion Value, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of each share
of such Series C-V Preferred Stock.
(h) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
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 hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 7F and in
the taking of all such action as may be necessary or appropriate to protect the
Conversion Rights against impairment.
(i) Definitions. As used in this Section 7F, the following
terms shall have the following meanings:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued (or, pursuant to Section 7F.4(d)(ii), deemed to be issued) by the
Company after September 8, 2000, other than shares of Common Stock issued or
issuable:
27
(i) upon conversion of shares of Series C-V Preferred Stock;
(ii) to officers, directors or employees of, or financial
advisors or other consultants to, the Company pursuant to a Plan or Plans or
pursuant to any acquisition, financing or other written agreement so long as any
such Plan or written agreement has been approved by the Board of Directors
(including at least one of the members of the Board of Directors designated by
the holders of the Series C-V Preferred Stock while such holders have the right
to designate one or more directors); and
(iii) as a dividend or distribution on Series C-V Preferred
Stock.
"Affiliate" shall have the meaning given such term in Rule 405
promulgated under the Securities Act.
"Common Stock" shall mean the common stock, no par value, of the
Company.
"Conversion Rights" shall mean the rights to convert Series C-V
Preferred Stock into Common Stock as provided in this Section 7F.
"Convertible Securities" shall mean any evidences of indebtedness,
shares (other than Common Stock or Series C-V Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.
"Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
"Original Issue Date" shall mean _____, 200_ [to be the date the
Series C-V Preferred Stock is issued].
"Original Purchase Price" shall mean the original purchase price of
$2.65 per share for each share of Series C-V Preferred Stock, as such amount
shall be adjusted for all stock splits, combinations, consolidations, stock
distributions, stock dividends or other recapitalization transactions involving
the Series C-V Preferred Stock.
"Plan" shall mean a written stock grant, option plan or purchase
plan or other employee stock incentive program.
"Preferred Stock" shall mean the preferred stock, par value $.01 per
share, of the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series C-V Conversion Rate" shall mean the number of shares of
Common Stock into which a share of Series C-V Preferred Stock is convertible.
28
"Series C-V Conversion Value" shall have the meaning given such term
in Section 7F.4(a).
"Series C-V Preferred Stock" shall mean those authorized shares of
Preferred Stock of the Company designated as "Series C-V Preferred Stock", par
value $0.01 per share.
5. Optional Redemption of Series C-V Preferred Stock. The Company may, at
any time after ______, 200_ [Three years from issue date], and from time to
time, call for redemption and repurchase of any and all shares of Series C-V
Preferred Stock for a purchase price per share equal to the Series C-V Original
Issue Price. The Company shall give written notice via certified mail, and any
Series C-V Holder shall have the right to convert the shares of Series C-V
Preferred Stock held by it at any time prior to the payment date specified in
such notice. Any such redemption and repurchase shall be made from funds legally
available for such purpose and which are not otherwise restricted.
6. Voting Rights. The Series C-V Holders shall have no voting power
whatsoever except to the extent otherwise expressly provided by the Delaware
General Corporation Law, and no Series C-V Holder shall vote or otherwise
participate in any proceeding in which actions shall be taken by the Company or
the stockholders thereof or be entitled to notification as to any meeting of the
stockholders.
7. Protective Provision. So long as shares of Series C-V Preferred Stock
are outstanding, the Company shall not without first obtaining the approval (by
vote or written consent, as provided by the Delaware General Corporation Law) of
the holders of at least a majority of the then outstanding shares of Series C-V
Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series C-V Preferred Stock, including, but not limited to, the creation or
authorization of any Senior Securities.
(b) increase the size of the authorized number of Series C-V
Preferred Stock; or
(c) do any act or thing not authorized or contemplated by this
Certificate of Incorporation which would result in taxation of the Series C-V
Holders under Section 305 of the Internal Revenue Code of 1986, as amended (or
any comparable provision of the Internal Revenue Code as hereafter from time to
time amended).
If the holders of a majority of the then outstanding shares of Series C-V
Preferred Stock agree to allow the Company to alter or change the rights,
preferences or privileges of the shares of Series C-V Preferred Stock, pursuant
to Subsection (a) above, so as to affect adversely the Series C-V Preferred
Stock, then the Company will deliver notice of such approved alteration or
change to the Series C-V Holders that did not agree to such alteration or change
(the "Series C-V Dissenting Holders"), and the Series C-V Dissenting Holders
shall thereafter have the right for a period of 30 days to convert pursuant to
the terms of this Certificate of Incorporation as
29
they exist prior to such alteration or change or continue to hold their shares
of Series C-V Preferred Stock subject to the approved alteration or change of
the rights, preferences or privileges of the Series C-V Preferred Stock.
8. Status of Converted Stock. In the event any shares of Series C-V
Preferred Stock shall be converted pursuant to Section 7F.4, the shares so
converted shall be canceled, shall return to the status of authorized but
unissued preferred stock of no designated series, and shall not be issuable by
the Company as Series C-V Preferred Stock.
9. Preference Rights. Nothing contained herein shall be construed to
prevent the Board of Directors of the Company from issuing one or more series of
preferred stock with dividend and/or liquidation preferences on parity with or
junior to the dividend and liquidation preferences of the Series C-V Preferred
Stock.
30
IN WITNESS WHEREOF, this Certificate of Designations have been duly
adopted by the Board of Directors of the Company and have been duly executed on
behalf of the Company by its Secretary this ____ day of _____, 200_.
XX0.XXX INC.
By: ____________________________________
Secretary
Attestation:
_____________________
Name:
31
EXHIBIT B
EXHIBIT B-1
THIS WARRANT AND ANY SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), NOR UNDER ANY
STATE SECURITIES LAW AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR COUNSEL
TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED, OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF
ARE RESTRICTED AS DESCRIBED HEREIN.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THIS WARRANT AND
THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT ARE RESTRICTED BY THE
INVESTOR'S RIGHTS AGREEMENT (THE "INVESTOR'S RIGHTS AGREEMENT"), DATED JUNE 7,
2000. A COPY OF THE INVESTORS' RIGHTS AGREEMENT IS ON FILE WITH THE CORPORATE
SECRETARY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. A COPY THEREOF MAY
BE OBTAINED AT NO COST UPON WRITTEN REQUEST THEREFOR MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE CORPORATE SECRETARY AT THE PRINCIPAL OFFICES
OF THE COMPANY.
XX0.XXX INC.
Warrant to purchase 462,264 shares of Common Stock,
par value $0.01 per share
No.W-C_ _______, 200_
32
THIS CERTIFIES that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, The Travelers Indemnity Company
(the "Holder"), is entitled to subscribe for and purchase from Xx0.xxx Inc., a
Delaware corporation (the "Company"), upon the terms and conditions set forth
herein, at any time or from time to time, during the period commencing on the
date set forth above and expiring at 5:00 p.m. (New York City time) on ______,
200_ [To be three years from the date of this Warrant] (the "Expiration Date"),
Four Hundred Sixty-Two Thousand Two Hundred Sixty-Four (462,264) shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"), at an
exercise price (the "Exercise Price") per share equal to $2.65. As used herein,
the term this "Warrant" shall mean and include this Warrant and any Warrant or
Warrants hereafter issued as a consequence of the exercise or transfer of this
Warrant in whole or in part. As used herein, the term "Holder" shall include any
transferee to whom this Warrant has been transferred in accordance with the
terms hereof.
The number of shares of Common Stock issuable upon exercise of this
Warrant (the "Warrant Shares") and the Exercise Price may be adjusted from time
to time as hereinafter set forth in Section 6.
1. This Warrant may be exercised until 5:00 p.m. (New York City time) on
the Expiration Date, as to the whole or any lesser number of whole Warrant
Shares, by transmission by telecopy of the Election to Exercise, followed within
three (3) business days by the surrender of this Warrant (with the Election to
Exercise attached hereto duly executed) to the Company at its office at 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as is
designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
product of the Exercise Price and the number of Warrant Shares for which this
Warrant is being exercised (the "Aggregate Exercise Price").
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
shall not then have been actually delivered to the Holder. Within five (5)
business days after each such exercise of this Warrant and receipt by the
Company of this Warrant, the Election to Exercise and the Aggregate Exercise
Price, the Company shall issue and deliver to the Holder a certificate or
certificates for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Warrant Shares (or portions thereof) subject to purchase
hereunder.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize
33
any equitable or other claim to or interest in such Warrant on the part of any
other person, and shall not be liable for any registration of transfer of
Warrants which are registered or to be registered in the name of a fiduciary or
the nominee of a fiduciary unless made with the actual knowledge of the general
counsel of the Company that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer. In all cases of transfer by
an attorney, executor, administrator, guardian, or other legal representative,
duly authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the request of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
to the Company or its duly authorized agent. Notwithstanding anything contained
herein to the contrary, the Company shall have no obligation to cause Warrants
to be transferred on its books to any person if, in the opinion of counsel to
the Company, such transfer does not comply with the provisions of the Act and
the rules and regulations thereunder.
4. The Company, until the expiration or termination of this Warrant, shall
reserve and keep available out of its authorized and unissued common stock,
solely for the purpose of providing for the exercise of the rights to purchase
all Warrant Shares granted pursuant to this Warrant and all other Common Stock
Warrants, such number of shares of common stock as shall, from time to time, be
sufficient therefor. The Company covenants that all shares of stock issuable
upon exercise of this Warrant, upon receipt by the Company of the full Exercise
Price therefor, shall be validly issued, fully paid, nonassessable, and free of
preemptive rights.
5. The issuance of any Warrant, Warrant Shares or other securities upon
the exercise of this Warrant, and the delivery of certificates or other
instruments representing such Warrant Shares or other securities, except as
otherwise required by law, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance, other than applicable transfer
taxes. Notwithstanding anything contained herein, all applicable transfer taxes
shall be borne by the Holder.
6. The number of Warrant Shares and the Exercise Price shall be subject to
adjustment from time to time as provided in this Section.
6.1 If, from September 29, 2000 and prior to the Expiration Date, the
Company shall pay or make a dividend or other distribution on any
class of capital stock of the Company in Common Stock, the number of
Warrant Shares shall be increased by multiplying such number of
shares by a fraction of which the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the
day immediately preceding the date of such distribution, and the
numerator shall be the sum of (a) such number of shares and (b) the
total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after
the opening of business on the date following such distribution.
34
6.2 If, from September 29, 2000 and prior to the Expiration Date, the
outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the number of Warrant
Shares at the opening of business on the day following the day upon
which such subdivision or combination becomes effective shall be
proportionately increased, and, conversely, if outstanding shares of
Common Stock shall each be combined into a smaller number of shares
of Common Stock, the number of Warrant Shares at the opening of
business on the day following the day upon which such combination
becomes effective shall be proportionately decreased, such increase
or decrease, as the case may be, to become effective immediately
after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
6.3 The reclassification of Common Stock into securities (other than
Common Stock) and/or cash and/or other consideration shall be deemed
to involve a subdivision or combination, as the case may be, of the
number of shares of Common Stock outstanding immediately prior to
such reclassification into the number or amount of securities and/or
cash and/or other consideration outstanding immediately thereafter,
and the effective date of such reclassification shall be deemed to
be "the day upon which such subdivision becomes effective" or "the
day upon which such combination becomes effective," as the case may
be, within the meaning of Section 6.1.
6.4 If and whenever from December 8, 2000 and prior to the Expiration
Date, the Company issues or sells any Convertible Securities (as
defined below) or any shares of Common Stock for a consideration per
share less than the Exercise Price in effect immediately prior to
the time of such issue or sale, then immediately upon such issue or
sale or deemed issue or sale, the Exercise Price shall be reduced to
the Exercise Price determined by dividing (A) the sum of (i) the
product derived by multiplying the Exercise Price in effect
immediately prior to such issue or sale by the number of shares of
Common Stock Deemed Outstanding (as defined below) immediately prior
to such issue or sale, plus (ii) the consideration, if any, received
by the Company upon such issue or sale, by (B) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or
sale. In such instances, the number of Warrant Shares shall be
increased by multiplying such number of shares by a fraction, of
which the numerator will be the Exercise Price in effect immediately
prior to such issue or sale, and the denominator will be the
Exercise Price immediately after such issue or sale. "Common Stock
Deemed Outstanding" means, at any given time, the number of shares
of Common Stock actually outstanding at such time, plus the number
of shares of Common Stock deemed to be outstanding assuming exercise
and/or conversion of the Company's Options (as defined below) and
Convertible Securities, whether or not such Options or Convertible
Securities are actually exercisable at such time. "Options" means
any rights, warrants or options sold or granted by the Company to
subscribe for or purchase Common Stock or
35
Convertible Securities. "Convertible Securities" means any stock or
securities directly or indirectly convertible into or exchangeable
for Common Stock.
There shall be no adjustment to the number of Warrant Shares with
respect to (A) the issuance or sale of shares or options to purchase
shares of the Company Common Stock to employees, officers, directors
and consultants of the Company and its subsidiaries (as such number
of shares is appropriately adjusted for subsequent stock splits,
stock combinations, stock dividends and racapitalizations) pursuant
to plans or arrangements approved by the Company's Board of
Directors; (B) the issue or sale to other entities or the owners
thereof for acquisition purposes; (C) to banks or other
institutional credit financing sources; and (D) the issuance of
Common Stock upon conversion of any shares of any series of the
Company's Preferred Stock.
36
7. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses and, if reasonably requested, an indemnity reasonably
acceptable to the Company, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
8. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
9. This Warrant shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the rules governing the
conflicts of laws.
10. The parties hereby irrevocably consent to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with,
or simultaneously with this Warrant, or a breach of this Warrant.
IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly
executed by its officers thereunto duly authorized as of the date and year set
forth below.
Dated: ____________, 200_
XX0.XXX INC.
By:_________________________________
Name:
Title:
37
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns, and transfers unto __________________ a Warrant to purchase __________
shares of Common Stock, par value $0.01 per share, of Xx0.xxx Inc. (the
"Company"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated: __________________
Signature ____________________
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the name as written
upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
38
To: Xx0.xxx Inc.
_______________
_______________
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase _______ Warrant
Shares covered by the within Warrant and tenders payment herewith [in the amount
of $_________] in accordance with the terms thereof, certifies that he owns this
Warrant free and clear of any and all claims, liens and/or encumbrances and
requests that certificates for such securities be issued in the name of, and
delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: _________________________ Name: _____________________
(Print)
Address: _______________________________________________________________________
(Signature)
39
EXHIBIT B-2
THIS WARRANT AND ANY SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), NOR UNDER ANY
STATE SECURITIES LAW AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR COUNSEL
TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED, OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF
ARE RESTRICTED AS DESCRIBED HEREIN.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THIS WARRANT AND
THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT ARE RESTRICTED BY THE
INVESTOR'S RIGHTS AGREEMENT (THE "INVESTOR'S RIGHTS AGREEMENT"), DATED JUNE 7,
2000. A COPY OF THE INVESTORS' RIGHTS AGREEMENT IS ON FILE WITH THE CORPORATE
SECRETARY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. A COPY THEREOF MAY
BE OBTAINED AT NO COST UPON WRITTEN REQUEST THEREFOR MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE CORPORATE SECRETARY AT THE PRINCIPAL OFFICES
OF THE COMPANY.
XX0.XXX INC.
Warrant to purchase 1,024,920 shares of Common Stock,
par value $0.01 per share
No.W-C_ _______, 200_
40
THIS CERTIFIES that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, The Travelers Indemnity Company
(the "Holder"), is entitled to subscribe for and purchase from Xx0.xxx Inc., a
Delaware corporation (the "Company"), upon the terms and conditions set forth
herein, at any time or from time to time, during the period commencing on the
date set forth above and expiring at 5:00 p.m. (New York City time) on ______,
200_ [To be three years from the date of this Warrant] (the "Expiration Date"),
One Million, Twenty-Four Thousand Nine Hundred Twenty (1,024,920) shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"), at an
exercise price (the "Exercise Price") per share equal to $1.14. As used herein,
the term this "Warrant" shall mean and include this Warrant and any Warrant or
Warrants hereafter issued as a consequence of the exercise or transfer of this
Warrant in whole or in part. As used herein, the term "Holder" shall include any
transferee to whom this Warrant has been transferred in accordance with the
terms hereof.
The number of shares of Common Stock issuable upon exercise of this
Warrant (the "Warrant Shares") and the Exercise Price may be adjusted from time
to time as hereinafter set forth in Section 6.
1. This Warrant may be exercised until 5:00 p.m. (New York City time) on
the Expiration Date, as to the whole or any lesser number of whole Warrant
Shares, by transmission by telecopy of the Election to Exercise, followed within
three (3) business days by the surrender of this Warrant (with the Election to
Exercise attached hereto duly executed) to the Company at its office at 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as is
designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
product of the Exercise Price and the number of Warrant Shares for which this
Warrant is being exercised (the "Aggregate Exercise Price").
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
shall not then have been actually delivered to the Holder. Within five (5)
business days after each such exercise of this Warrant and receipt by the
Company of this Warrant, the Election to Exercise and the Aggregate Exercise
Price, the Company shall issue and deliver to the Holder a certificate or
certificates for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Warrant Shares (or portions thereof) subject to purchase
hereunder.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize
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any equitable or other claim to or interest in such Warrant on the part of any
other person, and shall not be liable for any registration of transfer of
Warrants which are registered or to be registered in the name of a fiduciary or
the nominee of a fiduciary unless made with the actual knowledge of the general
counsel of the Company that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer. In all cases of transfer by
an attorney, executor, administrator, guardian, or other legal representative,
duly authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the request of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
to the Company or its duly authorized agent. Notwithstanding anything contained
herein to the contrary, the Company shall have no obligation to cause Warrants
to be transferred on its books to any person if, in the opinion of counsel to
the Company, such transfer does not comply with the provisions of the Act and
the rules and regulations thereunder.
4. The Company, until the expiration or termination of this Warrant, shall
reserve and keep available out of its authorized and unissued common stock,
solely for the purpose of providing for the exercise of the rights to purchase
all Warrant Shares granted pursuant to this Warrant and all other Common Stock
Warrants, such number of shares of common stock as shall, from time to time, be
sufficient therefor. The Company covenants that all shares of stock issuable
upon exercise of this Warrant, upon receipt by the Company of the full Exercise
Price therefor, shall be validly issued, fully paid, nonassessable, and free of
preemptive rights.
5. The issuance of any Warrant, Warrant Shares or other securities upon
the exercise of this Warrant, and the delivery of certificates or other
instruments representing such Warrant Shares or other securities, except as
otherwise required by law, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance, other than applicable transfer
taxes. Notwithstanding anything contained herein, all applicable transfer taxes
shall be borne by the Holder.
6. The number of Warrant Shares and the Exercise Price shall be subject to
adjustment from time to time as provided in this Section.
6.3 If, from December 8, 2000 and prior to the Expiration Date, the
Company shall pay or make a dividend or other distribution on any
class of capital stock of the Company in Common Stock, the number of
Warrant Shares shall be increased by multiplying such number of
shares by a fraction of which the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the
day immediately preceding the date of such distribution, and the
numerator shall be the sum of (a) such number of shares and (b) the
total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after
the opening of business on the date following such distribution.
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6.4 If, from December 8, 2000 and prior to the Expiration Date, the
outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the number of Warrant
Shares at the opening of business on the day following the day upon
which such subdivision or combination becomes effective shall be
proportionately increased, and, conversely, if outstanding shares of
Common Stock shall each be combined into a smaller number of shares
of Common Stock, the number of Warrant Shares at the opening of
business on the day following the day upon which such combination
becomes effective shall be proportionately decreased, such increase
or decrease, as the case may be, to become effective immediately
after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
6.3 The reclassification of Common Stock into securities (other than
Common Stock) and/or cash and/or other consideration shall be deemed
to involve a subdivision or combination, as the case may be, of the
number of shares of Common Stock outstanding immediately prior to
such reclassification into the number or amount of securities and/or
cash and/or other consideration outstanding immediately thereafter,
and the effective date of such reclassification shall be deemed to
be "the day upon which such subdivision becomes effective" or "the
day upon which such combination becomes effective," as the case may
be, within the meaning of Section 6.1.
6.4 If and whenever from December 8, 2000 and prior to the Expiration
Date, the Company issues or sells any Convertible Securities (as
defined below) or any shares of Common Stock for a consideration per
share less than the Exercise Price in effect immediately prior to
the time of such issue or sale, then immediately upon such issue or
sale or deemed issue or sale, the Exercise Price shall be reduced to
the Exercise Price determined by dividing (A) the sum of (i) the
product derived by multiplying the Exercise Price in effect
immediately prior to such issue or sale by the number of shares of
Common Stock Deemed Outstanding (as defined below) immediately prior
to such issue or sale, plus (ii) the consideration, if any, received
by the Company upon such issue or sale, by (B) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or
sale. In such instances, the number of Warrant Shares shall be
increased by multiplying such number of shares by a fraction, of
which the numerator will be the Exercise Price in effect immediately
prior to such issue or sale, and the denominator will be the
Exercise Price immediately after such issue or sale. "Common Stock
Deemed Outstanding" means, at any given time, the number of shares
of Common Stock actually outstanding at such time, plus the number
of shares of Common Stock deemed to be outstanding assuming exercise
and/or conversion of the Company's Options (as defined below) and
Convertible Securities, whether or not such Options or Convertible
Securities are actually exercisable at such time. "Options" means
any rights, warrants or options sold or granted by the Company to
subscribe for or purchase Common Stock or
43
Convertible Securities. "Convertible Securities" means any stock or
securities directly or indirectly convertible into or exchangeable
for Common Stock.
There shall be no adjustment to the number of Warrant Shares with
respect to (A) the issuance or sale of shares or options to purchase
shares of the Company Common Stock to employees, officers, directors
and consultants of the Company and its subsidiaries (as such number
of shares is appropriately adjusted for subsequent stock splits,
stock combinations, stock dividends and racapitalizations) pursuant
to plans or arrangements approved by the Company's Board of
Directors; (B) the issue or sale to other entities or the owners
thereof for acquisition purposes; (C) to banks or other
institutional credit financing sources; and (D) the issuance of
Common Stock upon conversion of any shares of any series of the
Company's Preferred Stock.
44
7. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses and, if reasonably requested, an indemnity reasonably
acceptable to the Company, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
8. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
9. This Warrant shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the rules governing the
conflicts of laws.
10. The parties hereby irrevocably consent to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with,
or simultaneously with this Warrant, or a breach of this Warrant.
IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly
executed by its officers thereunto duly authorized as of the date and year set
forth below.
Dated: ____________, 200_
XX0.XXX INC.
By:_________________________________
Name:
Title:
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns, and transfers unto __________________ a Warrant to purchase __________
shares of Common Stock, par value $0.01 per share, of Xx0.xxx Inc. (the
"Company"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated: ___________________
Signature ________________
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the name as written
upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
To: Xx0.xxx Inc.
_______________
_______________
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase _______ Warrant
Shares covered by the within Warrant and tenders payment herewith [in the amount
of $_________] in accordance with the terms thereof, certifies that he owns this
Warrant free and clear of any and all claims, liens and/or encumbrances and
requests that certificates for such securities be issued in the name of, and
delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: _________________________ Name: _____________________
(Print)
Address: _______________________________________________________________________
(Signature)
