EXHIBIT 10.9
NOTE AND WARRANT PURCHASE AGREEMENT
This Note and Warrant Purchase Agreement (this "Agreement") is made and
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entered into as of October 10, 1997 between WorldRes, Inc., a California
corporation (the "Company") located at 00 Xxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000
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and the persons (the "Purchasers") listed on Exhibit A attached hereto (the
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"Schedule of Purchasers").
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SECTION 1
Authorization and Sale of the Securities
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1.1 Authorization. The Company has authorized the sale and issuance of
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(i) convertible subordinated promissory notes in the form attached hereto as
Exhibit B (the "Notes") in an aggregate principal amount of up to $1,300,000,
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and (ii) warrants in the form attached hereto as Exhibit C (the "Warrants") to
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purchase shares of capital stock of the Company issued in the Company's next
Equity Financing (as defined below) at a per share exercise price equal to the
per share purchase price of the securities issued in such financing. The shares
of capital stock issuable upon conversion of the Notes are referred to as the
"Conversion Shares." The shares of capital stock issuable upon exercise of the
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Warrants are referred to herein as the "Warrant Shares." The Notes, the
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Warrants, the Conversion Shares and the Warrant Shares are hereinafter
collectively referred to as the "Securities." For purposes of this Agreement,
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an "Equity Financing" shall mean a sale after the date hereof of shares of the
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Company's equity securities which results in gross proceeds to the Company of
not less than $4,000,000 (inclusive of the proceeds received by the Company from
the sale of the Notes), in a single transaction or series of related
transactions, to venture capital, corporate, institutional or private investors,
including at least one institutional investor that was not a shareholder of the
Company prior to the closing of such transaction.
1.2 Sale of Notes and Warrants. Subject to the terms and conditions
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hereof, the Company will issue and sell to the Purchasers, and the Purchasers
will buy from the Company, Notes in the respective amounts specified opposite
each Purchaser's name on the Schedule of Purchasers for the respective
consideration specified next to each Purchaser's name. Further, the Company
will issue and sell to each Purchaser, and each Purchaser will buy from the
Company, a Warrant exercisable for a number of Warrant Shares equal to twenty
percent (20%) of the outstanding principal balance of the Note held by such
Purchaser (the "Warrant Coverage") divided by the per share purchase price of
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the securities issued in the next Equity Financing. The purchase price for each
Warrant shall be equal to $100.00 per $100,000 of Warrant Coverage.
1.3 Equity Financing. If an Equity Financing is completed while any Note
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remains outstanding, then (a) all interest owing under any outstanding Note
shall be paid by the Company, at its option, in cash or capital stock of the
Company issued in the next Equity Financing and (b) each Purchaser shall cancel
the then outstanding principal amount of all Notes then held by such Purchaser,
in whole, at the closing of the next Equity Financing in payment of the purchase
price for the Conversion Shares, and convert such indebtedness into such
Conversion Shares at the same purchase price and upon the same terms as shares
of capital stock are sold to purchasers in the next Equity Financing. At the
closing of the next Equity Financing,
each Purchaser shall execute a stock purchase agreement substantially similar to
that executed by other purchasers in the next Equity Financing.
1.4 Conditions to Closing of Equity Financing; Registration Rights. The
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obligations of the Company to issue Conversion Shares, and the rights of each
Purchaser to purchase such shares as described in Section 1.3 above, are subject
to the conditions that:
(a) The Company shall have obtained all requisite approvals of and
made all required filings with applicable federal and state securities and
corporate law authorities;
(b) The Company shall have obtained all appropriate Board and
shareholder consents, waivers and approvals required in connection with the
transaction;
(c) Each Purchaser and the Company shall have executed a stock
purchase agreement covering the sale of the Conversion Shares substantially
similar to that executed by the other purchasers in the next Equity Financing;
and
(d) Such stock purchase agreement (or other agreement executed
concurrently therewith) shall grant each Purchaser rights with respect to
registration under the Securities Act of 1933, as amended, of shares of Common
Stock issued or issuable to such Purchaser upon conversion of the Conversion
Shares and the Warrant Shares, which registration rights shall be substantially
identical to those granted to the other purchasers in the next Equity Financing;
provided that the Company and the Purchaser will use their respective best
efforts to ensure that the conditions set forth in this Section 1.4 are timely
satisfied.
1.5 Issuance of Securities on Conversion. As soon as practicable after
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conversion of each Note, the Company at its expense will cause to be issued in
the name of and delivered to the holder of the Note, a certificate or
certificates for the number of fully paid and non-assessable Conversion Shares
to which that holder shall be entitled on such conversion. No fractional shares
will be issued on conversion of the Note. If on conversion of the Note a
fraction of a share results, the Company will pay the cash value of that
fractional share, calculated on the basis of the applicable conversion price.
SECTION 2
Closing Date: Delivery
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2.1 Closing Date of Note Financing. The closing of the transactions
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contemplated by this Agreement (the "Closing") shall be held at the offices of
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Venture Law Group, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx, concurrently
with the execution and delivery of this Agreement or at such other place and
time as the Company and a majority of the Purchasers mutually agree upon orally
or in writing.
2.2 Delivery. At the Closing, the Company will deliver to each Purchaser
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a Note in the principal amount designated in the Schedule of Purchasers and a
Warrant as set forth on the Schedule of Purchasers. Each Purchaser shall deliver
to the Company by check or wire the
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amount designated in the Schedule of Purchasers. Warrants will be issued to the
Purchasers in the manner set forth in Section 1.2.
SECTION 3
Representations and Warranties of the Company
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The Company hereby represents, warrants and covenants to the Purchasers as
follows:
3.1 Organization and Standing. The Company is a corporation duly
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organized and existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws.
3.2 Corporate Power. The Company has, and will have as of the Closing,
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all requisite legal and corporate power to execute and deliver this Agreement,
to sell and issue (or reserve for issuance) the Securities hereunder and to
carry out and perform it obligations under the terms of this Agreement.
3.3 Capitalization. Immediately prior to the Closing, and other than as
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represented by the Notes, the Conversion Shares, the Warrants and the Warrant
Shares, the authorized capital stock of the Company will consist of 10,000,000
shares of Common Stock, of which 762,144 shares are issued and outstanding,
550,000 shares have been reserved under the Company's 1995 Stock Plan, of which
options to purchase 318,800 shares are outstanding under the Plan and options to
purchase 173,056 shares are available for future grant, 4,165,840 shares of
Preferred Stock, of which 474,536 shares are designated as Series A Preferred
Stock, of which 437,199 shares are issued and outstanding and warrants to
purchase 26,666 shares of Series A Preferred Stock are outstanding, and of which
1,845,652 shares are designated as Series B Preferred Stock, of which 1,422,481
shares are issued and outstanding and warrants to purchase 72,565 shares of
Series B Preferred Stock are outstanding.
3.4 Authorization. All corporate action on the part of the Company, its
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officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, the authorization,
sale, issuance and delivery of the Notes and the Warrants and the performance of
the Company's obligations hereunder has been taken or will be taken prior to the
Closing. This Agreement, the Warrants, and the Notes, when executed and
delivered by the Company, shall constitute valid and binding obligations of the
Company enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The Warrant Shares and the Conversion Shares, when issued in
compliance with the provisions of this Agreement (assuming the Purchasers
exercise the Warrants and convert the Conversion Shares pursuant to their
terms), will be validly issued, fully paid and nonassessable, and will be free
of any liens or encumbrances created by the Company, provided, however, that the
Securities may be subject to restrictions on transfer under state and or federal
securities laws as set forth herein or otherwise required at the time a transfer
is proposed.
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SECTION 4
Investment Representations
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Each of the Purchasers severally represents and warrants to the Company
with respect to the purchase of the Securities that the Purchaser has the right
and authority to enter into this Agreement and further represents as follows:
4.1 Experience. The Purchaser has sufficient knowledge and experience in
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investments of this type that it is capable of understanding and evaluating the
merits and risks of this investment and has the ability to bear a complete loss
of the investment. It has a preexisting relationship with one or more of the
Company's directors or officers which enables it to judge the business and
financial acumen of the person(s) with whom such relationship exists. The
Purchaser is an "Accredited Investor" within the meaning of Securities and
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Exchange Commission Rule 501 of Regulation D, as presently in effect.
4.2 Investment. The Purchaser is acquiring the Securities for investment
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for his or its own account and not with the view to, or for resale in connection
with, any distribution thereof. It understands that the securities to be
purchased have not been registered under the Securities Act of 1933 (the
"Securities Act") or qualified under the California Corporate Securities Law of
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1968 in reliance on specific exemptions from the registration and qualification
provisions, respectively, thereunder which depend upon, among other things, the
bona fide nature of the investment intent as expressed herein.
4.3 Rule 144. The Purchaser acknowledges that the Securities must be held
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indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions including, among other things, the existence of a public
market for the Securities, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being make
through a "broker's transaction" or in transactions directly made with a "market
maker" (as provided by Rule 144 (f)) and the number of shares being sold during
any three-month period not exceeding specified limitations. The Purchaser is
further aware that Rule 144(k) permits persons who have not been affiliates (as
defined in Rule 144(a)) of the Company for at least three months and who have
beneficially owned their shares for at least two years after full payment for
such shares, to sell such shares without regard to the current public
information, manner of sale and volume limitations described above.
4.4 No Public Market. The Purchaser understands that no public market now
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exists for any of the Securities and that it is unlikely that any such public
market will ever exist.
4.5 Access to Data. The Purchaser has had an opportunity to discuss the
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Company's business, operations and objectives with the Company's management.
The Purchaser understands that such discussions, as well as the written
information given to the Purchaser by the Company, were intended to describe the
aspects of the Company's business and prospects
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which the Company believes to be material but were not necessarily a thorough or
exhaustive description.
SECTION 5
Conditions to Closing of Purchasers
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The Purchasers' obligations to complete the transactions contemplated by
this Agreement at the Closing are subject to the fulfillment on or prior to the
Closing Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
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warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in this
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Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
SECTION 6
Restrictions on Transferability of Securities: Compliance with Securities Act
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6.1 Restrictions on Transferability. The Securities shall be transferable
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only in accordance with the conditions specified in this Section 6, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each holder of Securities will cause a proposed transferee of
any of the Securities held by such holder to agree to take and hold such
Securities subject to the provisions and upon the conditions specified in this
Section 6.
6.2 Restrictive Legend. Each certificate or instrument representing the
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Securities shall (unless otherwise permitted by the provisions of Section 6.3
below) be stamped or otherwise imprinted with a legend in substantially the
following form (in addition to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION.
In the event that a Purchaser satisfies the requirements of Rule 144(k),
the Company will, upon request, remove the legend set forth above from such
Purchaser's certificate; provided, however, that if the Company reasonably
believes that an opinion of counsel for such Purchaser
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is necessary in order to determine that the requirements of Rule 144(k) have
been satisfied, the Company shall request, and the Purchaser shall provide, such
opinion prior to the removal of the legend.
6.3 Notice of Proposed Transfers. The holder of each certificate or
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instrument representing Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 6.3. Prior to any proposed transfer
of any Securities, unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer. Each such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (i) an unqualified written
opinion of legal counsel, who shall be reasonably satisfactory to the Company,
in form and substance reasonably satisfactory to the Company's counsel, to the
effect that the proposed transfer of the Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Securities and Exchange Commission (the "Commission") to the effect that the
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transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such securities shall be entitled to transfer
such securities in accordance with the terms of the notice delivered by the
holder to the Company. Each certificate evidencing the Securities transferred
as above shall bear the appropriate restrictive legend set forth in Section 6.2
above, except that such certificate shall not bear such restrictive legend if in
the opinion of counsel for the Company such legend is not required (under Rule
144(k) or otherwise) in order to establish compliance with any provisions of the
Securities Act. Notwithstanding the foregoing, no legal opinion or no-action
letter need be obtained with respect to a transfer to (a) a partner, a partner
of a partner or an affiliate of a partner, active or retired, of a holder of
Securities, or (b) the estate of any such holder, if (i) the Company is notified
in writing prior to such transfer and given such information regarding the
transfer as it or its legal counsel may reasonably request, and (ii) the
transferee agrees to be subject to the terms of this Agreement.
SECTION 7
Miscellaneous
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7.1 Governing Law. This Agreement shall be governed in all respects by
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the internal laws of the State of California, without giving effect to the
principles of conflict of laws thereof.
7.2 Survival. The representations, warranties, covenants and agreements
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made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby.
7.3 Successors and Assigns. Except as otherwise provided herein, the
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provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided however, that the rights of a Purchaser to purchase Securities shall
not be assignable without the consent of the Company.
7.4 Entire Agreement; Amendment. This Agreement and the exhibits hereto
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constitute the full and entire understanding and agreement between the parties
with regard to the
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subject hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that holders of in excess
of 50% of the outstanding principal amount represented by the Notes may, with
the consent of the Company, waive or amend, on behalf of all Purchasers, any
provisions hereof.
7.5 Notices, etc. All notices and other communications required or
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permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address set forth in the
Company's records, or (b) if to any other holder of Securities purchased
hereunder, at such address as such holder shall have furnished to the Company in
writing in the manner provided in this Section, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Securities who has so furnished an address to the Company, or (c)
if to the Company, to its address set forth on the cover page of this Agreement
and addressed to the attention of the President, or at such other address as the
Company shall have furnished to the Purchasers by first class mail.
7.6 Delays or Omissions. No delay or omission to exercise any right,
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power or remedy accruing to any Purchaser, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such Purchaser, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under the
Agreement, or by law or otherwise afforded to any holder shall be cumulative and
not alternative.
7.7 Expenses. The Company and each Purchaser shall bear its or his own
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expenses and legal fees incurred on its or his behalf with respect to this
Agreement and the transactions contemplated hereby.
7.8 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
7.9 Severability. In the event that any provision of this Agreement
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becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue to full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
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The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
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Title: President
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The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
THE PURCHASERS: Bayview Investors, Ltd
By: /s/ Xxxxx Xxxxxx Xxxxxxxx
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Name: Xxxxx Xxxxxx Xxxxxxxx
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Title: Managing Director
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The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
THE PURCHASERS:
/s/ Xxxx Xxxxxxx, Jr.
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Xxxx Xxxxxxx, Jr.
The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
THE PURCHASERS:
/s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS: Xxxxx Xxxxxxx Investment Partnership No. 5, L.P.
By: /s/ Xxxx X. Xxxxx
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Name: Xxxx X. Xxxxx
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Title: Executive Vice President,
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Secretary-Treasurer
FSI No. 2 Corporation, General Partner
The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS:
/s/ Xxxxxx X. Xxxxx
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Xxxxxx Xxxxx
The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS:
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, Xx.
The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS: Scripps Ventures, LLC
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
--------------------------------
Title: CEO
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The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS: Technology Funding Partners III, L.P.
By: Technology Funding Inc.,
Managing General Partner
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Vice President
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The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS: Technology Funding Venture Partners IV, an
Aggressive Growth Fund, L.P.
By: Technology Funding Inc.,
Managing General Partner
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
--------------------------------
Title: Vice President
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The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS: Technology Funding Venture Partners V, an
Aggressive Growth Fund, L.P.
By: Technology Funding Inc.,
Managing General Partner
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
--------------------------------
Title: Vice President
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The foregoing Note and Warrant Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY: WORLDRES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE PURCHASERS:
/s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx
EXHIBIT A
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Schedule of Purchasers
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Amount of Warrant Warrant
Convertible Coverage Purchase Total
Purchaser Promissory Note Amount Price Amount Due
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Bayview Investors, Ltd. $ 36,364.00 $ 7,272.80 $ 7.27 $ 36,371.27
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Xxxx X. Xxxxxxx, Xx. $ 100,000.00 $ 20,000.00 $ 20.00 $ 100,020.00
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Xxxxx Xxxxxxx Investment Partnership $ 187,500.00 $ 37,500.00 $ 37.50 $ 187,537.50
No. 5, L.P.
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Xxxxxxx X. Xxxx $ 13,000.00 $ 2,600.00 $ 2.60 $ 13,002.60
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Xxx Xxxxx $ 120,000.00 $ 24,000.00 $ 24.00 $ 120,024.00
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Xxxxxx X. Xxxxxx, Xx. $ 100,000.00 $ 20,000.00 $ 20.00 $ 100,020.00
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Scripps Ventures, LLC $ 375,000.00 $ 75,000.00 $ 75.00 $ 375,075.00
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Technology Funding Partners III, L.P. $ 140,625.00 $ 28,125.00 $ 28.13 $ 140,653.13
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Technology Funding Venture Partners IV, $ 42,187.50 $ 8,437.50 $ 8.44 $ 42,195.94
an Aggressive Growth Fund, L.P.
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Technology Funding Venture partners V, $ 4,687.50 $ 937.50 $ 0.94 $ 4,688.44
an Aggressive Growth Fund, L.P.
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Xxxxx Xxxxxxxxx $ 4,046.17 $ 809.23 $ 0.81 $ 4,046.98
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TOTAL $1,123,410.17 $224,682.03 $224.69 $1,123,634.86
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EXHIBIT B
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Form of Promissory Note
THE SECURITIES REPRESENTED BY THIS NOTE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS NOTE TO THE
SECRETARY OF THE CORPORATION.
$((NoteAmount)) WorldRes, Inc.
October 10, 1997
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
WorldRes, Inc., a California corporation (the "Maker"), for value received,
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promises to pay to ((Name)) (the "Creditor") the principal sum of
--------
((NoteAmountSpelled)) ($((NoteAmount))) together with interest from the date of
this Note on the unpaid principal balance at a rate equal to 8.0% per annum,
computed on the basis of the actual number of days elapsed and a year of 365
days. Except as may be prohibited by the forms of subordination agreement
requested by holders of Senior Indebtedness (as defined below), all principal
and interest hereunder is payable on the earlier of (i) February 10, 1998, or
(ii) the closing date of the Maker's next Equity Financing (as that term is
defined in that certain Note and Warrant Purchase Agreement of even date
herewith between Maker, Creditor and certain others (the "Note Agreement")).
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The holder of this Note is entitled to the benefits and subject to certain
obligations under the Note Agreement (including certain rights and obligations
to convert this Note into securities of the Maker) and may enforce the
agreements of the Maker contained therein and exercise the remedies provided for
thereby. The benefits and rights of the holder are subject to certain
conditions and restrictions also set forth in the Note Agreement, which
conditions and restrictions may be enforced against the holder hereof.
Payment shall be made in lawful tender of the United States and shall be
credited first to accrued interest then due and payable with the remainder
applied to principal. Prepayment of the principal, in whole or in part together
with accrued interest, may be made at any time without penalty or premium,
provided the Maker shall provide ten (10) business days prior written notice to
the Creditor of the Maker's intent to prepay this Note and the Creditor shall
have the right to convert this Note within such ten (10) business day period as
provided above.
Except as permitted in the forms of subordination agreement requested by
holders of Senior Indebtedness, (i) no amount shall be paid by the Maker in
respect of the principal of and interest on this Note at the time outstanding,
and (ii) no other action prohibited by such subordination agreements shall be
taken.
This Note shall be subject to customary forms of subordination agreement
requested from time to time by holders of Senior Indebtedness, and as a
condition to the Creditor's rights hereunder, the Maker may require that the
Creditor execute such forms of subordination agreement.
"Senior Indebtedness" as used herein shall mean the principal of (and
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premium, if any) and unpaid interest on, (i) indebtedness of the Maker or with
respect to which the Maker is a guarantor to banks, insurance companies, lease
financing institutions or other lending institutions regularly engaged in the
business of lending money, which is for money borrowed (or purchase or lease of
equipment in the case of lease financing) by the Maker, whether or not secured,
under agreements in effect as of the date of this Note or amendments thereof,
and (ii) such additional indebtedness as may subsequently be approved by the
Board of Directors, including the approval of at least one director who has been
designated as such by a "Purchaser," as such term is defined under the Note
Agreement.
No indebtedness which does not constitute Senior Indebtedness shall be
senior in any respect to this Note.
Subject to the payment in full of all Senior Indebtedness, the holder of
this Note shall be subrogated to the rights of holders of Senior Indebtedness as
set forth in the forms of subordination agreement requested by holders of Senior
Indebtedness.
If action is instituted to collect this Note, the Maker promises to pay all
costs and expenses, including reasonable attorneys' fees, incurred in connection
with such action. The Maker hereby waives notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor and all other
notices or demands relative to this instrument.
Neither this Note nor any of the rights, interests or obligations hereunder
may be assigned, by operation of law or otherwise, in whole or in part, by the
Maker without the prior written consent of the holder except in connection with
an assignment in whole to a successor corporation to the Maker in a merger of
the Maker or a sale of all or substantially all of the Maker's property and
assets and then only if the holder's rights hereunder are not impaired.
This Note shall be construed in accordance with the laws of the state of
California, without regard to the conflicts of law provisions of the state of
California or of any other state.
-2-
IN WITNESS WHEREOF, Maker and Creditor have each caused this Note to be
signed in their respective names on the date first set forth above.
MAKER: WORLDRES, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
Address:
00 Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
CREDITOR: ((SignatureBlock))
Address:
___________________________________________
___________________________________________
___________________________________________
-3-
EXHIBIT C
---------
Form of Warrant
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THIS WARRANT AND
RESTRICTING ITS TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS WARRANT TO THE
SECRETARY OF THE CORPORATION.
WORLDRES, INC.
STOCK PURCHASE WARRANT
This certifies that ((Name)) or assigns (the "Holder"), for value received,
------
is entitled to purchase from WorldRes, Inc., a California corporation (the
"Company"), a number of fully paid and nonassessable shares of the Company's
-------
capital stock issuable in the next Equity Financing (as that term is defined in
that certain Note and Warrant Purchase Agreement of even date herewith between
Holder, the Company and certain others (the "Agreement")) equal to
---------
((WarrantAmountSpelled)) ($((WarrantAmount))) divided by the per share purchase
price of such shares in the next Equity Financing at a per share purchase price
equal to the per share purchase price of such shares in the next Equity
Financing. The shares of the Company's capital stock for which this Warrant is
exercisable are referred to herein as the "Warrant Shares" and the per share
--------------
purchase price of such Warrant Shares is referred to herein as the "Stock
-----
Purchase Price." This Warrant may be exercised at any time or from time to time
--------------
up to and including 5:00 p.m. (Pacific time) on the fifth anniversary of the
date hereof (the "Expiration Date"), unless this Warrant is earlier terminated
---------------
pursuant to Section 8 hereof, upon surrender to the Company at its principal
office at 00 Xxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000 (or at such other location as
the Company may advise Holder in writing) of this Warrant properly endorsed with
the Form of Subscription attached hereto duly filled in and signed and upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of Warrant Shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Stock Purchase Price and the Warrant
Shares are subject to adjustment as provided in Section 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. This Warrant
------------------------------------------------------
is exercisable at the option of the Holder of record hereof, at any time or from
time to time, up to the Expiration Date or the date of earlier termination
pursuant to Section 8 hereof for all and any part of the Warrant Shares (but not
for a fraction of a share). The Company agrees that the Warrant Shares
purchased under this Warrant shall be and are deemed to be issued to the Holder
hereof as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment made for such
shares. Certificates for the Warrant Shares so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
Warrant Shares, the Company shall cancel this Warrant and execute and deliver a
new Warrant or Warrants of like tenor for the balance of the Warrant Shares
purchasable under the Warrant surrendered upon such purchase to
the Holder hereof within a reasonable time, not exceeding fifteen (15) days
after the date of such surrender. Each stock certificate so delivered shall be
in such denominations as may be requested by the Holder hereof and shall be
registered in the name of such Holder or such other name as shall be designated
by such Holder.
2. Conversion of Warrant.
---------------------
2.1 Right to Convert. In addition to, and without limiting, the
----------------
other rights of the Holder hereunder, the Holder shall have the right (the
"Conversion Right") to convert this Warrant or any part hereof into Warrant
----------------
Shares at any time and from time to time during the term hereof. Upon exercise
of the Conversion Right, the Company shall deliver to the Holder, without
payment by the Holder of any Stock Purchase Price or any cash or other
consideration, that number of Warrant Shares computed using the following
formula:
X=Y (A-B)
-------
A
Where: X= The number of Warrant Shares to be issued to the Holder
Y= The number of Warrant Shares purchasable pursuant to this Warrant
A= The Fair Market Value of one Warrant Share as of the Conversion
Date
B= The Stock Purchase Price
2.2 Method of Exercise. The Conversion Right may be exercised by the
------------------
Holder by the surrender of this Warrant to the Company at its principal office
at the address indicated on the first paragraph of this Warrant, together with a
written notice specifying that the Holder intends to exercise the Conversion
Right and indicating the number of Warrant Shares to be acquired upon exercise
of the Conversion Right. Such conversion shall be effective upon the Company's
receipt of this Warrant, together with the conversion notice, or on such later
date as is specified in the conversion notice (the "Conversion Date") and, at
---------------
the Holder's election, may be made contingent upon the closing of the Company's
initial public offering of any securities pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act").
--------------
Certificates for the Warrant Shares so acquired shall be delivered to the Holder
within a reasonable time, not exceeding fifteen (15) days after the Conversion
Date. If applicable, the Company shall, upon surrender of this Warrant for
cancellation, deliver a new Warrant evidencing the rights of the Holder to
purchase the balance of the Warrant Shares which Holder is entitled to purchase
hereunder.
2.3 Fair Market Value. "Fair Market Value" of a share of Warrant
----------------- -----------------
Shares or Common Stock (issued upon conversion thereof) as of a particular date
means: (a) if traded on an exchange or quoted on The Nasdaq National Market,
then the prior trading day's closing price, (b) if conversion is effective as of
the closing of the Company's initial public offering of any securities pursuant
to a registration statement under the Securities Act, the "price to public"
specified for such shares in the final prospectus for such public offering, (c)
if listed by the National Daily Quotation Service "Pink Sheets," then the
average of the most-recently reported
-2-
bid and ask prices and (d) otherwise, the price as determined in good faith by
the Board of Directors of the Company.
3. Shares to be Fully Paid; Reservation of Shares. The Company covenants
----------------------------------------------
and agrees that all Warrant Shares (and shares of its Common Stock reserved for
issuance upon conversion of such Warrant Shares) which may be issued upon the
exercise or conversion of the rights represented by this Warrant will, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable and
free from all preemptive rights of any shareholder and free of all taxes, liens
and charges with respect to the issue thereof. The Company further covenants
and agrees that during the period within which the rights represented by this
Warrant may be exercised or converted, the Company will use its best efforts to
cause a sufficient number of shares of authorized but unissued capital stock
(and shares of its Common Stock for issuance on conversion of such capital
stock, if any) to be authorized when and as required to provide for the exercise
or conversion of the rights represented by this Warrant. The Company will take
all such action as may be necessary to assure that such shares of capital stock
(and shares of Common Stock for issuance on conversion of such capital stock, if
any) may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the stock may be listed. The Company will not take any action which would
result in any adjustment of the Stock Purchase Price (as described in Section 4
hereof) if the total number of shares of capital stock issuable after such
action upon exercise or conversion of all outstanding warrants, together with
all shares of capital stock of the same class and series as such capital stock
then outstanding and all shares of capital stock of the same class and series as
such capital stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of shares of capital stock of the same class and series as the
Warrant Shares then authorized by the Company's Articles of Incorporation.
4. Adjustment of Stock Purchase Price and Number of Shares. The Stock
-------------------------------------------------------
Purchase Price and the number of shares purchasable upon the exercise or
conversion of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events described in this Section 4. Upon each
adjustment of the Stock Purchase Price, the Holder of this Warrant shall
thereafter be entitled to purchase, at the Stock Purchase Price resulting from
such adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall
-----------------------------------
at any time subdivide any of its outstanding shares of the same class and series
as the Warrant Shares into a greater number of shares, the Stock Purchase Price
in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case any outstanding shares of the same class and
series as the Warrant Shares shall be combined into a smaller number of shares,
the Stock Purchase Price in effect immediately prior to such combination shall
be proportionately increased.
-3-
4.2 Dividends, Reclassification. If at any time or from time to time
---------------------------
any holders of securities of the same class and series as the Warrant Shares
shall have received or become entitled to receive, without payment thereof,
(A) any shares of the Company's Preferred Stock, Common Stock or
any shares of stock or other securities which are at any time directly or
indirectly convertible into or exchangeable for Common Stock, or any rights or
options to subscribe for, purchase or otherwise acquire any of the foregoing by
way of dividend or other distribution;
(B) any cash paid or payable otherwise than as a regular
periodic cash dividend at a rate which is substantially consistent with past
practice (or, in the case of an initial dividend, at a rate which is
substantially consistent with industry practice); or
(C) any shares of the Company's Preferred Stock, Common Stock or
other or additional stock or other securities or property (including cash) by
way of spinoff, split-up, reclassification, combination of shares or similar
corporate rearrangement; (other than shares of the same class and series as the
Warrant Shares issued as a stock split, adjustments in respect of which shall be
covered by the terms of Section 4.1 above), then and in each such case, the
Holder hereof shall, upon the exercise or conversion of this Warrant, be
entitled to receive, in addition to the number of shares of such capital stock
receivable thereupon, and without payment of any additional consideration
thereof, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise or conversion had he or it been the Holder of
record of such capital stock as of the date on which holders of such capital
stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Conversion or Redemption. Should all of the Company's capital
------------------------
stock of the same class and series as the Warrant Shares be, or if outstanding
would be, at any time prior to the expiration of this Warrant or any portion
thereof, redeemed or converted into shares of the Company's Common Stock, then
this Warrant shall immediately become exercisable or convertible for that number
of shares of the Company's Common Stock equal to the number of shares of the
Common Stock that would have been received if this Warrant had been exercised in
full and the capital stock received thereupon had been simultaneously converted
immediately prior to such event, and the Stock Purchase Price shall be
immediately adjusted to equal the quotient obtained by dividing (x) the
aggregate Stock Purchase Price of the maximum number of shares of capital stock
for which this Warrant was exercisable or convertible immediately prior to such
conversion or redemption, by (y) the number of shares of Common Stock for which
this Warrant is exercisable or convertible immediately after such conversion or
redemption.
4.4 Other Notices. If at any time:
-------------
(1) the Company shall declare any cash dividend upon its shares of
the same class and series as the Warrant Shares;
(2) the Company shall declare any dividend upon its shares of the
same class and series as the Warrant Shares payable in stock or make any special
dividend or other distribution to the holders of its shares of the same class
and series as the Warrant Shares;
-4-
(3) the Company shall offer for subscription pro rata to the holders
of its shares of the same class and series as the Warrant Shares any additional
shares of stock of any class or other rights;
(4) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(6) the Company shall take or propose to take any other action,
notice of which is actually provided to or is required to be provided, pursuant
to any written agreement, to holders of its shares of the same class and series
as the Warrant Shares,
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown of the books of the Company, (a) at least 20 days prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividends, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, at least 20
days prior written notice of the date when the same shall take place. Any
notice given in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of shares of the same class and series as the Warrant Shares
shall be entitled thereto. Any notice given in accordance with the foregoing
clause (b) shall also specify the date on which the holders of shares of the
same class and series as the Warrant Shares shall be entitled to exchange their
stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be.
5. Issue Tax. The issuance of certificates for shares of the Warrant
---------
Shares shall be made without charge to the Holder of the Warrant for any issue
tax in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being transferred.
6. Closing of Books. The Company will at no time close its transfer books
----------------
against the transfer of any Warrant or of any shares of Warrant Shares in any
manner which interferes with the timely exercise of this Warrant.
7. No Voting or Dividend Rights; Limitation of Liability. Nothing
-----------------------------------------------------
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder in
respect of meetings of shareholders for the election of directors of the Company
or any other matters or any rights whatsoever as a shareholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that,
-5-
this Warrant shall have been exercised or converted. No provisions hereof, in
the absence of affirmative action by the Holder to purchase shares of capital
stock, and no mere enumeration herein of the rights or privileges of the Holder
hereof, shall give rise to any liability of such Holder for the Stock Purchase
Price or as a shareholder of the Company, whether such liability is asserted by
the Company or by its creditors.
8. Expiration. This Warrant shall expire upon the earlier to occur of (a)
----------
5:00 PM on the fifth anniversary of the date hereof, (b) the effective date of
any merger in which the Company is not the surviving entity or in which
shareholders of the Company prior to such merger hold less than 50% of the
voting power of the capital stock of the Company after such merger, or the sale
of all or substantially all of the Company's assets, or (c) the Company's sale
of its Common Stock in a firm commitment underwritten public offering pursuant
to a registration statement under the Securities Act of 1933, as amended, at a
public offering price of at least $10.00 per share (appropriately adjusted for
stock dividends, stock splits, reverse stock splits, recapitalizations or
similar transactions) with gross proceeds to the Company in excess of
$15,000,000.
9. Warrants Transferable. Subject to the provisions of the Agreement,
---------------------
this Warrant and all rights hereunder are transferable, in whole or in part,
without charge to the Holder hereof (except for transfer taxes), upon surrender
of this Warrant properly endorsed. Each Holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed in blank,
shall be deemed negotiable, and that the Holder hereof, when this Warrant shall
have been so endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
transfer hereof on the books of the Company any notice to the contrary
notwithstanding, but, until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.
10. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
amended, waived or modified upon written consent of the Company and holders of
in excess of 50% in interest of the Warrants issued pursuant to the Agreement,
provided that all such Warrants are amended, waived or modified in a like
manner.
11. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the Holder hereof or the Company shall be delivered
or shall be sent by certified or registered mail, postage prepaid, to each such
Holder at its address as shown on the books of the Company or to the Company at
the address indicated on the first paragraph of this Warrant.
12. Descriptive Headings and Governing Law. The descriptive headings of
--------------------------------------
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California, without giving effect to
the conflict of laws principles thereof.
13. Lost Warrants of Stock Certificates. The Company represents and
-----------------------------------
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock
-6-
certificate, the Company at its expense will make and deliver a new Warrant or
stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
14. Fractional Shares. No fractional shares shall be issued upon exercise
-----------------
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the Holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
-7-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its duly authorized officers, effective as of October __, 1997.
THE COMPANY: WORLDRES, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
-8-
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: ____________________
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________________________________________ (_____________)
shares of ____________ Stock of WorldRes, Inc. and herewith makes payment of
____________________ Dollars ($__________) thereof, and requests that the
certificates for such shares by issued in the name of, and delivered to
________________________________, whose address is ___________________________
_________________________________.
The undersigned represents that it is acquiring such ________________ Stock
for its own account for investment and not with a view to or for sale in
connection with any distribution thereof (subject, however, to any requirement
of law that the disposition thereof shall at all times by within its control).
DATED: ___________________
_____________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant)
_____________________________________
_____________________________________
(Address)
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the Holder of the within Warrant,
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Warrant, with respect to the number of shares of ________________
Stock covered thereby set forth herein below, unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
DATED: ___________________
_______________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
