EXHIBIT 10.22
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY
INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, STATE
SECURITIES STATUTES AND THE TERMS AND CONDITIONS HEREOF. THE HOLDER OF THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE
RESTRICTIONS HEREIN SET FORTH.
WARRANT
TO
PURCHASE 1,200,000 SHARES
OF
COMMON STOCK
OF
INTERNETWORK EXPERTS, INC.
This Warrant dated as of February 26, 2004 ("Warrant") certifies that,
for good and valuable consideration, Internetwork Experts, Inc., a Delaware
corporation (the "Company"), grants to I-Sector Corporation, a Delaware
corporation (the "Warrantholder"), subject to the terms and conditions set forth
herein, the right to subscribe for and purchase from the Company: one million
two hundred thousand (1,200,000) shares (the "Warrant Shares") of the Company's
common stock, par value $.01 per share ("Common Stock"), at a price per share of
twenty five cents ($0.25) (the "Exercise Price"), during the period from and
after 9:00 a.m. Houston, Texas time on the date of issuance of this Warrant and
to and including 5:00 p.m. Houston, Texas time on February 26, 2014 (the
"Expiration Date"). The Exercise Price and the number of Warrant Shares are
subject to adjustment from time to time as provided in Section 5.
1. DURATION AND EXERCISE OF WARRANT; LIMITATION EXERCISE PAYMENT
OF TAXES.
1.1 Duration and Exercise of Warrant. The rights represented
by this Warrant may be exercised at any time after six months from the
date of grant by the Warrantholder in whole or in part by surrender of
this Warrant, accompanied by the Exercise Form annexed hereto (the
"Exercise Form") duly executed by the Warrantholder, delivered to the
Secretary of the Company no fewer than five business days prior to the
proposed effective date of exercise, specifying the number of shares to
be acquired on, and the effective date of, such exercise. The Exercise
Form and notice may be delivered to the office of the Company located
at 00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (or such other
office or agency of the Company as it may designate by notice to the
Warrantholder at the address of such Warrantholder appearing on the
books of the Company) during normal business hours on any day (a
"Business Day") other than a Saturday, Sunday or a day on which the
Company is otherwise closed for business (a "Nonbusiness Day") on or
after 9:00 a.m. Houston, Texas time on the Initial Exercise Date but
not later than 5:00 p.m. on the Expiration Date (or 5:00 p.m. on the
next succeeding Business Day, if the Expiration Date is a Nonbusiness
Day), delivery of payment to the Company, by certified mail to the
attention of the Secretary of the Company, in cash, or by certified
check, bank cashier's check, or wire transfer. The Warrantholder may
withdraw notice of exercise of the Warrant at any time prior to close
of business on the business day preceding the proposed exercise date,
and in this instance, the Company will return the Exercise Form to the
Warrantholder. Certificates for the Warrant Shares specified in the
Exercise Form shall be delivered to the Warrantholder as promptly as
practicable, and in any event within 10 business days, thereafter. The
stock certificates so delivered shall be in denominations of at least
1,000 shares each or such other denomination as may be specified by the
Warrantholder and agreed upon by the Company, and shall be issued in
the name of the Warrantholder. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of
the certificates for the Warrant Shares, deliver to the Warrantholder a
new Warrant evidencing the rights to purchase the remaining Warrant
Shares, which new Warrant shall in all other respects be identical with
this Warrant.
1.2 Limitation on Exercise. If this Warrant is not exercised
prior to 5:00 p.m. on the Expiration Date (or the next succeeding
Business Day, if the Expiration Date is a Nonbusiness Day), this
Warrant, or any new Warrant issued pursuant to Section 1.1, shall cease
to be exercisable and shall become void and all rights of the
Warrantholder hereunder shall cease. The Warrant may not be exercised
if the issuance of such Warrant Shares or the method of payment of the
consideration for such Warrant Shares would constitute a violation of
any applicable federal or state securities or other laws or
regulations, including any rule under Part 207 of Title 12 of the Code
of Federal Regulations as promulgated by the Federal Reserve Board, or
any rules or regulations of any stock exchange on which the Common
Stock may be listed.
1.3 CASHLESS OR NET EXERCISE. NOTWITHSTANDING SECTION 1.1
ABOVE, THE WARRANTHOLDER, IN LIEU OF THE PAYMENT OF CASH OR CERTIFIED
BANK CHECK FOR THE AGGREGATE EXERCISE PRICE FOR SHARES OF COMMON STOCK
AS TO WHICH THIS WARRANT IS BEING EXERCISED, MAY ELECT BY WRITTEN
NOTICE DELIVERED TO THE COMPANY AT THE TIME THE EXERCISE FORM IS
DELIVERED TO THE COMPANY PURSUANT TO SECTION 1.1 ABOVE, TO EFFECT A
"CASHLESS EXERCISE," IN WHICH CASE THE WARRANTHOLDER NEED NOT PAY THE
AGGREGATE EXERCISE PRICE TO THE COMPANY IN CASH OR BY CERTIFIED BANK
CHECK, AND EITHER (i) THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE
UPON SUCH EXERCISE SHALL BE REDUCED BY A NUMBER OF SHARES OF COMMON
STOCK DETERMINED BY DIVIDING (x) THE AGGREGATE EXERCISE PRICE FOR ALL
SHARES OF COMMON STOCK AS TO WHICH THIS WARRANT IS THEN BEING EXERCISED
BY (y) THE CURRENT MARKET PRICE (AS SUCH TERM IS HEREINAFTER DEFINED)
PER SHARE OF COMMON STOCK AT THE DATE OF SUCH EXERCISE, AND BY THEN
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ROUNDING DOWNWARD TO THE NEAREST WHOLE SHARE OF COMMON STOCK, OR (II)
THE EXERCISE PRICE WILL BE PAID BY DELIVERY BY THE WARRANTHOLDER OF
SHARES OF COMMON STOCK OWNED BY THE WARRANTHOLDER HAVING A CURRENT
MARKET PRICE EQUAL TO THE EXERCISE PRICE.
1.4 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereto; provided, however,
that the Warrantholder shall be required to pay any and all taxes which
may be payable in respect to any transfer involved in the issuance and
delivery of any certificates for Warrant Shares in a name other than of
the then Warrantholder as reflected upon the books of the Company.
1.5 Transfer; Restriction on Transfer and Legend. This Warrant
may only be exercised by the Warrantholder. This Warrant may only be
assigned or transferred to (i) any successor to Warrantholder by reason
of a merger, consolidation or statutory exchange of Warrantholder or
any successor to all or substantially all of Warrantholder's assets; or
(ii) any subsidiary or affiliate of Warrantholder; provided that
Warrantholder owns voting stock of such subsidiary or affiliate
entitling, Warrantholder to at least 80% of the voting power thereof in
the election of directors.
1.6 Divisibility of Warrant. This Warrant may be divided into
warrants representing one Warrant Share or multiples thereof, upon
surrender at the principal office of the Company on any Business Day,
without charge to any Warrantholder, except as provided below. The
Warrantholder will be charged for reasonable out-of-pocket costs
incurred by the Company in connection with the division of this Warrant
into Warrants representing fewer than one thousand (1,000) Warrant
Shares. Upon any such division, and, if permitted by subsection 1.5 and
in accordance with the provisions thereof, the Warrants may be
transferred or record to a name other than that of the Warrantholder of
record; provided, however, that the Warrantholder shall be required to
pay any and all transfer taxes with respect thereto.
2. RESERVATION AND LISTING OF SHARES. All Warrant Shares which are
issued upon the exercise of the rights represented by this Warrant shall, upon
issuance and payment of the Exercise Price, be validly issued, fully paid and
nonassessable and free from all taxes, liens, security interests, charges and
other encumbrances with respect to the issue thereof other than taxes in respect
of any transfer occurring contemporaneously with such issue. During the period
within which this Warrant may be exercised, the Company shall at all times have
authorized and reserved, and keep available free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of this
Warrant, and shall at its expense use all commercially reasonable efforts to
procure such listing thereof (subject to official notice of issuance) as then
may be required on all stock exchanges on which the Common Stock is then listed.
The Company shall, from time to time, take all such action as may be required to
assure that the par value per share of the Warrant Shares is at all times equal
to or less than the then effective Exercise Price.
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3. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT. If permitted by subsection
1.5 or 1.6 and in accordance with the provisions thereof, upon surrender of this
Warrant to the Company with a duly executed instrument of assignment and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant of like tenor in the name of the assignee named in
such instrument of assignment and this Warrant shall promptly be cancelled. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of such mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like tenor.
The term "Warrant" as used herein includes any Warrants issued in substitution
or exchange of this Warrant.
4. OWNERSHIP OF WARRANT. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in subsections 1.1, 1.5 and 1.6 or in Section 3.
5. CERTAIN ADJUSTMENTS. The Exercise Price at which Warrant Shares may
be purchased hereunder, and the number of Warrant Shares to be purchased upon
exercise hereof, are subject to change or adjustment as follows:
5.1 Issuance of Additional Shares of Common Stock.
(a) If at any time the Company shall (except as
hereinafter provided) issue or sell any Additional Shares (as
hereinafter defined) of Common Stock, other than Permitted
Issuances (as hereinafter defined), in exchange for
consideration in an amount per Additional Share of Common
Stock less than the Current Market Price (as hereinafter
defined), then the Exercise Price and the number of shares of
Common Stock for which this Warrant is exercised shall be
adjusted as follows.
(i) The Exercise Price shall be adjusted so
that it equals the Exercise Price in effect
immediately prior to the issue or sale, multiplied by
a fraction (A) the numerator of which is the sum of
the number of shares of Common Stock outstanding
immediately prior to the issue or sale multiplied by
the Current Market Price plus the number of shares of
Common Stock that could have been acquired at the
Current Market Price immediately prior to the issue
or sale using the aggregate consideration payable in
the issue or sale; and (B) the denominator of which
is the number of shares of Common Stock outstanding
immediately prior to the issuance or sale plus the
number of Additional Shares of shares of Common Stock
issued.
(ii) The number of shares of Common Stock
for which the Warrant is exercisable shall be
adjusted to equal the number of shares of Common
Stock for which the Warrant was exercisable
immediately prior
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to the sale, multiplied by a fraction (A) the
numerator of which is the Exercise Price after giving
effect to the adjustment and (B) the denominator of
which is the Exercise Price in effect immediately
prior to the issue or sale.
(b) If at any time the Company shall (except as
hereinafter provided) issue or sell any Additional Shares of
Common Stock, other than Permitted Issuances, in exchange for
consideration in an amount per Additional Share of Common
Stock less than the Exercise Price at the time the Additional
Shares of Common Stock are issued, then the Exercise Price and
the number of shares for which the Warrant is exercisable will
be adjusted as follows:
(i) The Exercise Price shall be adjusted to
equal (A) the Exercise Price for which this Warrant
is exercisable prior to the adjustment (B) multiplied
by a fraction, (x) the numerator of which is the sum
of the number of shares of Common Stock outstanding
immediately prior to the issue or sale multiplied by
the Exercise Price then in effect, plus the aggregate
consideration, if any, received by the Company upon
the issue or sale, and (y) the denominator of which
is the number of shares of Common Stock outstanding
immediately prior to the issue or sale plus the
number of Additional Shares of Common Stock issued.
(ii) The number of shares of Common Stock
for which this Warrant is exercisable shall be
adjusted to equal the number of shares of Common
Stock for which this Warrant is exercisable
immediately prior to such issue or sale, multiplied
by a fraction, (A) the numerator of which is the
Exercise Price after giving effect to the adjustment,
and (B) the denominator of which is the Exercise
Price in effect immediately prior to the issue or
sale.
(c) If at any time the Company (except as hereinafter
provided) shall issue or sell any Additional Shares of Common
Stock, other than Permitted Issuances, for consideration in an
amount per Additional Share of Common Stock which is less than
the Current Market Price and the Exercise Price at the time
the Additional Shares of Common Stock are issued, the
adjustment required under this Section shall be made in
accordance with the formula in paragraph (a) or (b) above
which results in the lower Exercise Price following such
adjustment.
(d) The provisions of Section 5.1(a), (b) and (c)
shall not apply to any issuance of Additional Shares of Common
Stock for which an adjustment is provided under Sections 5.2
or 5.3. No adjustment of the number of shares of Common Stock
for which a Warrant shall be exercisable shall be made under
Section 5.1(a), (b) and (c) upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase
rights or pursuant to the exercise of any conversion or
exchange rights in any Convertible Securities, if any such
adjustment shall previously have been made upon the issuance
of such warrants or other rights or
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upon the issuance of such Convertible Securities (or upon the
issuance of any warrant or other rights therefor) pursuant to
Section 5.2(a) or Section 5.2(b).
For purposes of this Section 5.1, the date as of which the Current
Market Price per share of Common Stock shall be computed shall be the earlier of
the date upon which the Company shall (i) enter into a firm contract for the
issuance of such shares or (ii) issue such shares.
5.2 Provisions Applicable to Section 5.1. For purposes of
Section 5.1, the following subsections (a) through (k), inclusive,
shall be applicable:
(a) Issuance of Warrants or Other Rights. If the
Company in any manner issues, sells, distributes or grants
(whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or Convertible Securities (as
hereinafter defined), whether or not such rights or options or
the right to convert or exchange any such Convertible
Securities are immediately exercisable, and if the price per
share for which shares of Common Stock are issuable upon the
exercise of such rights or options or upon conversion or
exchange of such Convertible Securities is less than (i) the
Exercise Price in effect immediately before the granting of
such rights or options or (ii) the Current Market Price per
share of Common Stock existing immediately before the granting
of such rights or options, then the maximum number of shares
of Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of the maximum amount
of such Convertible Securities issuable upon the exercise of
such rights or options shall (as of the date for the
determination of the Current Market Price per share of Common
Stock as hereinafter provided) be deemed to be outstanding and
to have been issued for such price per share. The price per
share for which shares of Common Stock are issuable upon the
exercise of such right or options or upon conversion or
exchange of such Convertible Securities shall be determined by
dividing (1) the total amount, if any, received or receivable
by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the
exercise of such rights or options, plus, in the case of such
Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the conversion
or exchange thereof, by (2) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
rights or options. No further adjustments of the Exercise
Price shall be made upon the actual issue of such Common Stock
or of such rights or options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible
Securities except as otherwise provided in subsection (d)
below. For purposes of this subsection (b), the date as of
which the Current Market Price per share of Common Stock shall
be computed shall be the earlier of the date upon which the
Company shall (i) enter into a firm contract for the issuance
of such rights or other options or (ii) issue such rights or
other options.
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(b) Issuance of Convertible Securities. If the
Company in any manner issues, sells, distributes or grants
(whether directly or by assumption in a merger or otherwise)
any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable,
and the price per share for which shares of Common Stock are
issuable upon such conversion or exchange shall be less than
(i) the Exercise Price in effect immediately prior to the time
of such issue or sale or (ii) the Current Market Price per
share of Common Stock existing immediately prior to the time
of such issue or sale, then the maximum number of shares of
Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date for the
determination of the Current Market Price per share of Common
Stock as hereinafter provided) be deemed to be outstanding and
to have been issued for such price per share; provided
however, except as otherwise specified in subsection (c)
below, (1) no further adjustments of the Exercise Price shall
be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (2)
if any such issue or sale of such Convertible Securities is
made upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such Convertible
Securities for which adjustments of the Exercise Price have
been or are to be made under other provisions of Sections 5.1
and 5.2, no further adjustment of the Exercise Price shall be
made by reason of such issue or sale. The price per share for
which shares of Common Stock are issuable upon such conversion
or exchange shall be determined by dividing (x) the total
amount received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities. For purposes of this subsection (c),
the date as of which the Current Market Price per share of
Common Stock shall be computed shall be the earlier of the
date upon which (i) the Company shall enter into a firm
contract for the issuance of such Convertible Securities or
(ii) such Convertible Securities are actually issued.
(c) Readjustment of Exercise Price. If (i) the
purchase price provided for in any rights or options referred
to in subsection (b) above, or (ii) the additional
consideration, if any, payable upon the conversion or exchange
of Convertible Securities referred to in paragraph (b) or (c)
above, or (iii) the rate at which any Convertible Securities
referred to in subsection (b) or (c) above are convertible
into or exchangeable for Common Stock shall change (other than
under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such
event shall forthwith be readjusted to the Exercise Price
which would have been in effect at such time had such rights,
options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially
granted, issued or sold. On the expiration of any such option
or right or the termination of any such right to convert or
exchange such Convertible Securities, the Exercise Price then
in effect shall be increased to the Exercise Price which would
have been in effect at the time of such expiration or
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termination had such right, option or Convertible Security
never been issued, and the Common Stock issuable thereunder
shall no longer be deemed to be outstanding. If the purchase
price provided for in any such rights or options referred to
in paragraph (b) above or the rate at which any Convertible
Securities referred to in paragraph (b) or (c) are convertible
into or exchangeable for Common Stock, shall be reduced at any
time under or by reason of provisions with respect thereto
designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise in any such rights
or options or upon conversion or exchange of any such
Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be adjusted to such amount as would
have obtained had such right, option or Convertible Securities
never been issued as to such Common Stock and had adjustments
never been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such
adjustment the Exercise Price then in effect hereunder is
thereby reduced.
(d) Minimum Adjustment. If any adjustment of the
Exercise Price pursuant to Section 5.1 results in an
adjustment of less than $.001 per share of Common Stock, no
such adjustment shall be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to $.001
or more per share of Common Stock; provided, however, upon any
adjustment of the Exercise Price resulting from (i) the
declaration of a dividend upon, or the mailing of any
distribution in respect of, any stock of the Company payable
in Common Stock or Convertible Securities or (ii) the
reclassification, by subdivision, combination or otherwise, of
the Common Stock into a greater or smaller number of shares,
the foregoing figure of $.001 per share (or such figure as
last adjusted) shall be proportionately adjusted; provided,
further, upon the exercise of this Warrant, the Company shall
make all necessary adjustments not theretofore made to the
Exercise Price up to and including the date upon which this
Warrant is exercised.
(e) Consideration for Dividends in Securities. If the
Company declares a dividend or makes any other distribution
upon any stock of the Company payable in either case in Common
Stock or Convertible Securities, such Common Stock or
Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
(f) Consideration for Rights or Options. If any
rights or options to purchase any shares of Common Stock or
Convertible Securities are issued in connection with the issue
or sale of other securities of the Company, together
comprising one integral transaction in which no specific
consideration is allocated to the rights or options, the
rights or options shall be deemed to have been issued without
consideration.
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(g) Determination of Consideration upon Payment of
Cash, Property or Merger. If any shares of Common Stock or
Convertible Securities or any rights or options to purchase
any such Common Stock or Convertible Securities are issued or
sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor,
after deduction of any accrued interest, dividends or any
expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection
therewith. If any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such
Common Stock or Convertible Securities are issued for a
consideration other than cash, the amount of the consideration
other than cash received by the Company shall be deemed to be
the fair market value on the date of issue of the securities
so issued by the Company, as determined in good faith by the
Board of Directors of the Company, less any expenses incurred
by the Company in connection therewith. If any shares of
Common Stock or Convertible Securities or any rights or
options to purchase such Common Stock or Convertible
Securities are issued in connection with any merger or
consolidation in which the Company is the surviving
corporation, the amount of consideration therefor shall be
deemed to be the fair market value thereof on the date of
issue, as determined in good faith by the Board of Directors
of the Company, for such portion of the assets and business of
the non-surviving corporation as the Board of Directors shall
attribute to such Common Stock, Convertible Securities, rights
or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is
not the surviving corporation or in the event of any sale of
all or substantially all of the assets of the Company for
stock or other securities of any corporation, the Company
shall be deemed to have issued a number of shares of its
Common Stock for stock or securities of the other corporation
computed on the basis of the actual exchange ratio on which
the transaction was predicated and for a consideration equal
to the fair market value on the date of such transaction of
such stock or securities of the other corporation, and if any
such calculation results in adjustment of the Exercise Price,
the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to
such merger, consolidation or sale, for the purposes of
subsection (n) below, shall be made after giving effect to
such adjustment of the Exercise Price.
(h) Record Date. If the Company takes a record of the
holders of the Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in
Common Stock or in Convertible Securities or (ii) to subscribe
for or purchase Common Stock or Convertible Securities, then
the record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of the dividend or the making of
such other distribution or the date of the granting of the
right of subscription or purchase, as the case may be.
(i) Shares Outstanding. The number of shares of
Common Stock deemed to be outstanding at any given time shall
(i) include shares of Common Stock issuable in respect of
scrip certificates which have been issued in lieu of
fractional shares of Common Stock, but (ii) exclude (1) shares
of Common Stock
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in the treasury of the Company or any Subsidiary, (2) shares
of Common Stock previously issued upon the exercise of the
Warrant and (3) shares of Common Stock issuable upon the
exercise of the Warrant.
(j) Splits and Combinations. If the Company at any
time subdivides its outstanding shares of Common Stock into a
greater number of shares, (i) the number of shares of Common
Stock for which the Warrant is exercisable immediately after
the occurrence of such event shall be adjusted to equal the
number of shares of Common Stock for which a holder of the
same number of shares of Common Stock for which the Warrant is
exercisable immediately prior to such event would own or be
entitled to receive after such event, and (ii) the Exercise
Price in effect immediately before the subdivision shall be
proportionately reduced, and, conversely, if the outstanding
shares of Common Stock of the Company are combined into a
smaller number of shares, the Exercise Price in effect
immediately before the combination shall be proportionately
increased.
(k) Reorganization, Reclassification or
Recapitalization of Company. In case of any capital
reorganization or reclassification or recapitalization of the
capital stock of the Company (other than (i) in the cases
referred to in subsection (k) of this Section 5.2 and (ii) a
change in par value, or from par value to no par value or from
no par value to par value) or in case of the consolidation or
merger of the Company with or into another corporation or in
case of the sale or transfer of the property of the Company as
an entirety or substantially as an entirety, there shall
thereafter be deliverable upon the exercise of this Warrant or
any portion thereof (in lieu of or in addition to the number
of shares of Common Stock theretofore deliverable) the number
of shares of stock or other securities or property to which
the holder of the number of shares of Common Stock which would
otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been
entitled upon such capital reorganization or reclassification
of capital stock, consolidation, merger or sale, and at the
same aggregate Exercise Price. Prior to and as a condition of
the consummation of any transaction described in the preceding
sentence, the Company shall make appropriate, written
adjustments in the application of the provisions herein set
forth satisfactory to the holders of Warrants entitled to
purchase not less than a majority of the shares of Common
Stock issuable upon the exercise thereof with respect to the
rights and interests of the holders of Warrants so that the
provisions set forth herein shall thereafter be applicable, as
nearly as possible, in relation to any shares of stock or
other securities or other property thereafter deliverable upon
exercise of this Warrant. Any such adjustment shall be made by
and set forth in a supplemental agreement between the Company
and the successor entity and be approved by the holders of
Warrants entitled to purchase not less than a majority of the
shares of Common Stock issuable upon the exercise thereof.
5.3 Rights Offering. If the Company effects an offering of
Common Stock pro rata among its stockholders, the Warrantholder shall
be entitled, at its option, to elect to
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participate in each and every such offering as though this Warrant had
been exercised and the Warrantholder were, at the time of any such
rights offering, then a holder of that number of shares of Common Stock
to which the Warrantholder is then entitled on the exercise hereof.
5.4 Notices.
(a) Upon any adjustment of the Exercise Price
pursuant to Section 5.1 or Section 5.2 above, a certificate
signed (i) by the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company or (ii) by any independent
firm of certified public accountants of recognized national
standing selected by, and at the expense of, the Company
setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was
calculated, shall be mailed (by first class mail, postage
prepaid) to the Warrantholder specifying the adjusted Exercise
Price and the number of shares of Common Stock purchasable
upon exercise of this Warrant after giving effect to the
adjustment of such number pursuant to Section 5.1 or Section
5.2. The certificate of any independent firm of certified
public accountants of recognized national standing selected by
the Board of Directors of the Company shall be conclusive
evidence of the correctness of any computation made under
Section 5.1 or Section 5.2.
(b) In case the Company proposes to (i) pay any
dividend payable in stock to the holders of shares of Common
Stock or to make any other distribution to the holders of
shares of Common Stock, (ii) offer to the holders of shares of
Common Stock rights to subscribe for or purchase any
additional shares of any class of stock or any other rights or
options or (iii) effect any reclassification of the Common
Stock (other than a reclassification involving merely the
subdivision or combination of outstanding shares of Common
Stock), or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of
securities or other property is to be made to holders of
shares of Common Stock), or any sale, transfer or other
disposition of its property, assets and business as an
entirety or substantially as an entirety, or the liquidation,
dissolution or winding up of the Company, then, in each such
case, the Company shall mail (by first class mail, postage
prepaid) to the Warrantholder notice of such proposed action,
which shall specify the date on which the books of the Company
shall close, or a record to be taken, for determining holders
of Common Stock entitled to receive such stock dividends or
other distribution of such rights or options, or the date on
which such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation,
dissolution or winding up shall take place or commence, as the
case may be, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to receive
securities or other property deliverable upon such action, if
any such date is to be fixed. Such notice shall be mailed in
the case of any action covered by clause (i) or (ii) above at
least 10 days prior to the record date for determining holders
of Common Stock for purposes of receiving such payment or
offer, and in the case of any action covered by clause (iii)
above at least 10 days prior to the
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date upon which such action takes place and 10 days prior to
any record date to determine holders of Common Stock entitled
to receive such securities or other property.
(c) Failure to file any certificate or notice or to
mail any notice, or any defect in any certificate or notice,
pursuant to this Section 5.4, shall not affect the legality or
validity of the adjustment of the Exercise Price, the number
of shares purchasable upon exercise of this Warrant, or any
transaction giving rise thereto.
5.5 Certain Definitions. The following terms shall have the
meanings indicated below:
(a) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Company after the
Closing Date, other than Warrant Shares.
(b) "Convertible Securities" means evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable for, with or without payment
of additional consideration in cash or property, additional
shares of Common Stock, either immediately or upon a specified
date or the happening of a specified event.
(c) "Current Market Price" per share of Common Stock
on any specified date means the highest of (a) the book value
thereof as determined in accordance with generally accepted
accounting principles but without any adjustment or reduction
for the amount, if any, that may, under modification to
generally accepted accounting principles after the date
hereof, be required to be listed as an offset to or reserve
against earnings or retained earnings by any firm of
independent public accountants of recognized national standing
selected by the Company, as at the last day of any month
ending within 60 days immediately preceding such date or (b)
the fair market value thereof as determined in good faith by
the Board of Directors of the Company as of a date which is
within 15 days of such date or (c) the average of the daily
market prices (determined as set forth in the next sentence),
if any, for 30 consecutive business days commencing 45
business days before such date, except that for the purposes
of Section 5.1(a) hereof the "Current Market Price" per share
of Common Stock, shall mean the market price on the business
day therein specified or (d) in the event that the Holder
shall at its option request an appraisal, the appraised value
thereof as determined by a national investment banking firm
selected by the Holder and acceptable to the Company (the cost
of such appraisal to be borne by the Company) determined
without regard to the illiquidity of the investment
represented by the Common Stock and without discount by reason
of ownership of a minority interest. The market price for each
such business day shall be the average of the last sale prices
on such day on all domestic stock exchanges on which the
Common Stock may then be listed, or, if no sale takes place on
such day on any such exchange, the average of the closing bid
and asked prices on such day as officially quoted on such
exchanges, or, if Common Stock is not then listed
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or admitted to trading on any domestic stock exchange, the
market price for each business day shall be the average of the
reported bid and asked prices on such day in the
over-the-counter market, as furnished by the National
Quotation Bureau, Inc., or, if such firm at the time is not
engaged in the business of reporting such prices, as furnished
by any similar firm then engaged in such business and selected
by the Company or, if there is no such firm, as furnished by
any member of the National Association of Securities Dealers,
Inc., selected by the Company.
(d) "Permitted Issuances" shall mean (i) the issuance
of shares of Common Stock upon exercise of the Warrants, (ii)
the issuance of shares of Common Stock pursuant to the
securities identified on Exhibit A hereto; (iii) if there
shall then be a public market for the Common Stock, the
issuance of shares of Common Stock upon receipt by the Company
of the Current Market Price therefor as described in clause
(a) of the definition of "Current Market Price" and (iv) at
any time prior to the time there is a public market for the
Common Stock, the issuance of shares of Common Stock, warrants
or Convertible Securities on terms that are at least as
favorable to the Company as terms that could be obtained in an
arm's length transaction with third Persons not Affiliates of
the Company and for consideration equal to the fair value of
such shares as determined in good faith by a majority of
disinterested members of the board of directors of the
Company.
5.6 Voluntary Adjustment by the Company. The Company may, at
its option, at any time during the term of the Warrant, reduce the then
current Exercise Price to any amount, consistent with applicable law,
deemed appropriate by the Board of Directors of the Company.
5.7 No Adjustment for Cash Dividends. No adjustment in respect
of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
6. NO IMPAIRMENT. The Company shall not by any action, including,
without limitation, amending its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, 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 of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate to protect the
rights of the Warrantholder against impairment. Without limiting the generality
of the foregoing, the Company will (a) not change the par value of any shares of
Common Stock receivable upon the exercise of this Warrant to an amount greater
than the amount payable therefor upon such exercise, (b) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, (c) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant,
and (d) not undertake any reverse stock split, combination, reorganization or
other reclassification of its capital stock which would have the effect of
making this Warrant exercisable for less than one share of Common Stock.
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Upon the request of the Warrantholder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to the Warrantholder, the continued validity of this
Warrant and the Company's obligations under it.
7. MISCELLANEOUS.
7.1 Entire Agreement. This Warrant [and the Registration
Rights Agreement] constitutes the entire agreement between the Company
and the Warrantholders with respect to this Warrant and Warrant Shares.
7.2 Binding Effects; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder.
Nothing in this Warrant, expressed or implied, is intended to or shall
confer on any person other than the Company and the Warrantholder any
rights, remedies, obligations or liabilities under or by reason of this
Warrant or the Warrant Shares.
7.3 Amendments and Waivers. This Warrant may not be modified
or amended except by an instrument in writing signed by the Company and
the Warrantholder. The Company, any Warrantholder or holders of Warrant
Shares may, by an instrument in writing, waive compliance by the other
party with any term or provision of this Warrant on the part of such
other party hereto to be performed or complied with. The waiver by any
such party of a breach of any term or provision of this Warrant shall
not be construed as a waiver of any subsequent breach.
7.4 Section and Other Headings. The section and other headings
contained in this Warrant are for reference purposes only and shall not
be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
7.5 Further Assurances. Each of the Company and the
Warrantholder shall do and perform all such further acts and things and
execute and deliver all such other certificates, instruments and/or
powers of attorney as may be necessary or appropriate) as any party
hereto may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this
Warrant.
7.6 Notices. All demands, requests, notices and other
communications required or permitted to be given under this Warrant
shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by United States certified or registered
first class mail, postage prepaid, to the parties hereto at the
following addresses or at such other address as any party hereto shall
hereafter specify by notice to the other party hereto:
14
(a) If to the Company, addressed to:
Internetwork Experts, Inc.
00000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxx
(b) If to the Warrantholder, addressed to the address of
appearing on the books of the Company.
Except as otherwise provided herein, all such demands, requests,
notices and other communications shall be deemed to have been received on the
date of personal delivery thereof or on the third Business Day after the mailing
thereof.
7.7 Separability. Any term or provision of this Warrant which
is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable any other
term or provision of this Warrant or affecting the validity or
enforceability of any of the terms or provisions of this Warrant in any
other jurisdiction.
7.8 Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant. With respect to any fraction of a share called for upon
any exercise hereof, the Company shall pay to the Warrantholder an
amount in cash equal to such fraction multiplied by the Current Market
Price.
7.9 Rights of the Holder. The Warrantholder shall not, solely
by virtue of this Warrant, be entitled to any rights of a stockholder
of the Company, either at law or in equity.
7.10 Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Texas and for all purposes
shall be governed by and construed in accordance with the laws of such
State applicable to contracts made and performed in Texas.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the date first written above.
/s/ Xxxx X. Xxxx
----------------------------------
Xxxx X. Xxxx, President
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EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned, the record holder of this Warrant, hereby irrevocably
elects to exercise the right, represented by this Warrant, to purchase _________
of the Warrant Shares and herewith tenders payment for such Warrant Shares to
the order of Internetwork Experts, Inc., in the amount of $___________, in
accordance with the terms of this Warrant. The undersigned requests that a
certificate for such Warrant Shares be registered in the name of I-Sector
Corporation, and that such certificate be delivered to 0000 Xxxxxxxxx Xxxxxxx,
Xxxxxxx, Xxxxx 00000.
Date: Signature:
------------------- --------------------------------
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EXHIBIT A
SHARES SUBJECT TO OUTSTANDING OPTION, WARRANTS, CONVERSION RIGHTS, ETC.
17
