EXHIBIT 10.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT.
Warrant No. 1 Void after
February 28, 2001
GIGA INFORMATION GROUP, INC.
PREFERRED STOCK PURCHASE WARRANT
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This Warrant is issued, for good and valuable consideration, receipt of
which is hereby acknowledged, to RRE Giga Investors, LP. (the "Holder") by Giga
Information Group, Inc., a Delaware corporation (the "Company"), in connection
with and as part of the issuance of a Convertible Promissory Note of even date
herewith (the "Note"). Each capitalized term not defined herein shall have the
meaning ascribed to it in the Note.
1. Purchase of Shares. Subject to the terms and conditions hereinafter
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set forth, if a Qualified Series B Financing (as defined below) shall have
occurred on or before February 28, 1996, the Holder shall be entitled, upon
surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the Holder hereof in writing), to
purchase from the Company such number of shares (the "Shares") of Series B
Preferred Stock ("Series B Preferred Stock") as shall equal the quotient
obtained by dividing 1,000,000 by the average price per share of the Series B
Preferred Stock issued as of the time the Company first consummates a Qualified
Series B Financing (excluding from the calculation of such price per share the
shares issued or issuable hereunder or upon conversion of the Note). For
example, if the Company shall consummate a Qualified Series B Financing with an
average price per share of $ 15, the aggregate number of shares issuable upon
exercise of this Warrant shall be 1,000,000/15, or 66,667 shares of Series B
Preferred Stock. In the event that the Company shall issue warrants ("Series B
Financing Warrants") to purchasers of its Series B Preferred Stock in a
Qualified Series B Financing, then the Company shall issue to the Holder a
warrant (the "Anti-Dilution Warrant") of like terms and exercisable for the same
class of stock as are the Series B Financing Warrants. The number of shares
issuable upon exercise of the Anti- Dilution Warrant shall equal the product of
the quotient of (i) 1,000,000 divided by the sum of (A) the gross proceeds to
the Company from the sale for cash of its Series B Preferred Stock on or before
February 28, 1996 in such Qualified Series B Financing (other than the
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stock issued or issuable on conversion of the Note or exercise of this Warrant)
plus (B) the aggregate initial exercise price of the Series B Financing
Warrants, multiplied by (ii) the number of shares of capital stock initially
issuable upon exercise of the Series B Financing Warrants (excluding shares of
capital stock issuable pursuant to any Additional Warrant issued pursuant to
Section 4.6 of the Purchase Agreement). For the purpose of any calculation
hereunder, of the purchase price of the Series B Preferred Stock, no portion of
the proceeds of the Qualified Series B Financing shall be allocated to any
Series B Financing Warrant. A "Qualified Series B Financing" shall mean the
sale, on or before February 28, 1996, for cash, in one or a series of
transactions, of shares of its Preferred Stock having terms no less favorable,
take as a whole, to the purchasers than those set forth in Exhibit I hereto, for
gross proceeds to the Company of at least $8 million (excluding the proceeds
from the sale of the Note upon its initial issuance).
2. Exercise Price. The exercise price for the Shares shall be 67% of the
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average per share price (prior to expenses and commissions) at which the Company
shall sell shares of its Series B Preferred Stock in a Qualified Series B
Financing (excluding from the calculation of such price per share the shares
issued or issuable hereunder or upon conversion of the Note). Such price shall
be subject to adjustment pursuant to Section 7 hereof (such price, as adjusted
from time to time, is herein referred to as the "Exercise Price"). Fractional
shares will be payable by the Company in cash.
3. Exercise Period. This Warrant is exercisable at any time and from time
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to time, in whole or in part following the consummation by the Company of a
Qualified Series B Financing and, except as provided below, shall remain so
exercisable until and including the earlier of February 28, 2001 and the date
five years from which the Company shall have first consummated a Qualified
Series B Financing. If not otherwise exercised pursuant to Section 4 hereof,
this Warrant shall immediately terminate upon (a) the closing of the issuance
and sale of shares of Common Stock of the Company in the Company's first
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, (the "Initial Public Offering"),
(b) the sale of all or substantially all the assets of the Company or (c) the
merger of the Company into or consolidation with any other entity in which at
least 50% of the voting power of the Company is transferred (an "Acquisition").
In the event of a transaction of the kind described above in this paragraph, the
Company shall notify the Holder at least ten (10) days prior to the consummation
of such event or transaction.
4. Method of Exercise.
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(a) Exercise for Cash. The purchase right represented by this Warrant may
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be exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit B duly executed) at
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the principal office of the Company and by the payment to the Company, by check,
of an amount equal to the then applicable Exercise Price per share multiplied
by the number of Shares then being purchased. The person or
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persons in whose name(s) any certificate(s) representing Shares shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty (30) days of receipt of such notice and, unless this Warrant
has been fully exercised or expired, a new warrant representing the portion of
the Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
(b) Net Issue Exercise.
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(i) In lieu of exercising this Warrant, the holder hereof may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
cancelled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
the holder hereof a number of shares of Series B Preferred Stock computed using
the following formula:
X = Y(A-B)
-----
A
Where X = The number of shares of Series B Preferred Stock to be issued to
the holder hereof.
Y = the number of shares of Series B Preferred Stock purchasable under
this Warrant.
A = the fair market value of one share of Series B Preferred Stock.
B = Exercise Price (as adjusted to the date of such calculations).
(ii) For purposes of this Section, fair market value of the Company's
Preferred Stock shall mean the price determined by the Company's Board of
Directors, acting in good faith upon a review of all relevant factors; provided,
however, that if this Warrant is exercised in conjunction with the Company's
Initial Public Offering, the fair market value of the Series B Preferred Stock
shall be equal to the offering price less any applicable underwriters' discounts
and commissions.
5. Reservation of Shares. The Company covenants that it will, at all times
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after the Qualified Series B Financing, keep available such number of authorized
shares of its Series B Preferred Stock and Common Stock, free from all
preemptive rights with respect thereto, which will be sufficient to permit the
exercise of this Warrant for the full number of Shares
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specified herein and the conversion of the Shares, if any, upon exercise of this
Warrant. The Company further covenants that such Shares, when issued pursuant to
the exercise of this Warrant, will be duly and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof.
6. Adjustment of Exercise Price and Number of Shares. The number of and
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kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Conversion or Redemption of Series B Preferred Stock. Should all of
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the Company's Series B Preferred Stock be, at any time prior to the expiration
of this Warrant, redeemed or converted into shares of the Company's Common Stock
in accordance with the Company's Articles of Incorporation, as amended and/or
restated and effective immediately prior to the redemption or conversion of all
of the Company's Series B Preferred Stock, then this Warrant shall immediately
become exercisable for that number of shares of the Company's Common Stock equal
to the number of shares of Common Stock which would have been received if this
Warrant had been exercised in full and the Shares received thereupon had been
simultaneously converted into Common Stock immediately prior to such event. The
Exercise Price per share of Common Stock shall be immediately adjusted to equal
the quotient obtained by dividing (x) the aggregate purchase price of the number
of shares of Series B Preferred Stock for which this Warrant was exercisable
immediately prior to such conversion or redemption by (y) the number of shares
of Common Stock for which this Warrant is exercisable immediately after such
conversion or redemption.
(b) Subdivisions and Combinations. If the Company shall at any time prior
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to the expiration of this Warrant subdivide its Series B Preferred Stock, by
split up or otherwise, or combine its Series B Preferred Stock, the number of
Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate adjustments shall also be
made to the purchase price payable per share, but the aggregate purchase price
payable for the total number of Shares purchasable under this Warrant (as
adjusted) shall remain the same. Any adjustment under this Section 7(b) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(c) Stock Dividends and Distributions. In case the Company shall at any
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time while this Warrant is outstanding and unexpired pay a dividend with respect
to Series B Preferred Stock, payable in shares of such stock (except any
distribution provided for in Section 6(b) or 6(d) herein), then the Exercise
Price in effect immediately prior to the record date for distribution of such
dividend or in the event that no record date is fixed, upon the making of such
dividend shall be adjusted to that price determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction (i) the
numerator of which shall be the total number of shares of such stock outstanding
immediately prior to such dividend and (ii) the denominator of which shall be
the total number of shares of such stock outstanding immediately after such
dividend.
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(d) Reclassification, Reorganization and Consolidation. In case of any
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reclassification, conversion of Series B Preferred Stock into Common Stock, or
capital reorganization or change in the Series B Preferred Stock, of the Company
(other than as provided for in Sections 6(a), (b) and (c) above), then, as a
condition of such reclassificonversion, reorganization or change, lawful
provision shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder of this Warrant,
so that such Holder shall have the right at any time prior to the expiration of
this Warrant to purchase, at a total price equal to that payable upon the
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property receivable in connection with such reclassification,
conversion, reorganization or change by a holder of the same number of shares of
Series B Preferred Stock as were purchasable by the Holder of this Warrant
immediately prior to such reclassification, conversion, reorganization or
change. In any such case appropriate provisions shall be made with respect to
the rights and interest of the Holder of this Warrant so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.
(e) Notice of Adjustment. When any adjustment is required to be made in
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the number or kind of shares purchasable upon exercise of the Warrant, or in the
Warrant Price, the Company shall promptly notify the Holder of such event and of
the number of shares of Series B Preferred Stock or other securities or property
thereafter purchasable upon exercise of the Warrant.
7. No Fractional Shares. No fractional shares shall be issued upon the
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exercise of this Warrant, and the number of shares of stock issued upon exercise
of this Warrant shall be rounded to the nearest whole share. In lieu of the
Company issuing any fractional shares to the Holder upon a net exercise under
Section 4(b) hereof, the Company shall pay to the Holder the fair market value
of such fractional share, as determined in good faith by the Company's Board of
Directors.
8. No Stockholder Rights. Prior to exercise of this Warrant, the Holder
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shall not be entitled to any rights of a shareholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
shareholder meetings, and such Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company.
9. Exchange of Warrant. Subject to any restriction upon transfer set
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forth in this Warrant, each Warrant may be exchanged for another Warrant or
Warrants of like tenor and representing in the aggregate a like number of
Warrants. Any Holder desiring to exchange a Warrant or Warrants shall make such
request in writing delivered to the Company, and
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shall surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant or Warrants, as the case may be, as so requested.
10. Mutilated or Missing Warrants. In case any Warrant shall be
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mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of such Warrant and indemnity or bond, if requested, also
reasonably satisfactory to the Company. An applicant for such substitute Warrant
shall also comply with such other reasonable regulations and pay such other
reasonable charges as the Company may prescribe.
11. Payment of Taxes. The Company will pay all taxes (other than any
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income taxes or other similar taxes), if any, attributable to the initial
issuance of the Warrant and the issuance of the Shares upon the exercise of the
Warrant, provided, however, that the Company shall not be required to pay any
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tax or taxes which may be payable in respect of the issuance or delivery of any
Warrant, or the transfer thereof, and no such issuance, delivery or transfer
shall be made unless and until the person requesting such issuance or transfer
has paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that no such tax is payable or such tax has been
paid.
12. Registration. The Warrants shall be numbered and shall be registered
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in a Warrant Register as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrant on the part of any other person,
and shall not be liable for any registration of transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration of transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
13. Transfer of Warrants. The Warrants shall be transferable on the books
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of the Company (the "Warrant Register") only upon delivery thereof duly endorsed
by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer, and only with the prior written consent of the Company. In all cases
of transfer by an attorney, the original power of attorney, duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants
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to be transferred on its books to any person, unless the Holder of such Warrants
shall furnish to the Company evidence of compliance with the Securities Act of
1933, as amended and applicable state blue sky laws.
14. Successors and Assigns. The terms and provisions of this Warrant
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shall inure to the benefit of, and be binding upon, the Company and the holders
hereof and their respective successors and assigns.
15. Amendments and Waivers. Except for the number of shares purchasable
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under this Warrant and except for the "Purchase Price" (as set forth in Section
2 hereof), any term of this Warrant may be amended and the observance of any
term of this Warrant may be waived (either generally or in a particular instance
and either retroactively or prospectively), with the written consent of the
Company and the holders of this Warrant and other warrants of like tenor and
effect issued of even date herewith entitled to a majority of the total number
of Shares issuable pursuant to this Warrant and such other warrants (except that
such consent will not be required for variations necessary to express the name
of the holder). Any waiver or amendment effected in accordance with this section
shall be binding upon each holder of this Warrant and any such other warrants at
the time outstanding, each future holder of all such warrants, and the Company.
16. Governing Law. This Warrant shall be governed by and construed and
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enforced in accordance with the laws of the State of Delaware without regard to
the possible application of principles of conflict of laws.
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IN WITNESS WHEREOF, the undersigned hereby executes this Stock Purchase
Warrant as of August ___, 1995.
GIGA INFORMATION GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
_________________________________________
Xxxxxxx Xxxxxxx, Vice President - Finance
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GIGA INFORMATION GROUP, INC.
XXX XXXXXXXXX XXXXXX
XXXXXXX, XXXXXXXXXXXXX 00000
September 17, 1996
RRE Giga Investors, L.P.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxx Xxxxxx
Dear Xx. Xxxxxx:
Reference is hereby made to that certain Preferred Stock Purchase Warrant,
dated as of August __, 1995 (the "Warrant"), which evidences the right of RRE
Giga Investors, L.P. (the "Warrantholder") to subscribe for and purchase from
Giga Information Group, Inc. (the "Company") 285,714 shares of the Company's
Series B Preferred Stock, $.001 par value. Capitalized terms used herein that
are undefined shall have the meanings assigned to them in the Warrant.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Acting in accordance with Section 15 of the Warrant, the Warrant is
hereby amended as follows:
(a) Section 4(b)(ii) is deleted in its entirety and a new Section
4(b)(ii) is inserted in lieu thereof which shall read as follows:
(ii) For purposes of this Section, fair market value of the
Company's Preferred Stock shall mean the price determined by
the Company's Board of Directors, acting in good faith upon
a review of all relevant factors; provided, however, that if
this Warrant is exercised in conjunction with the Company's
Initial Public Offering, the fair market value of the Series
B Preferred Stock shall be equal to the midpoint of the
filing range set forth in a registration statement on Form
S-1 as initially filed by the Company with the Securities
and Exchange Commission pursuant to the Securities Act of
1933, as amended.
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2. The Warrant, as supplemented and modified by this Letter
Agreement, contains the entire agreement among the parties with respect to the
subject matter thereof and amends, restates and supersedes all prior and
contemporaneous arrangements or understandings with respect thereto.
3. Upon the effectiveness of this Letter Agreement, on and after the
date hereof, each reference in the Warrant to "this Warrant," "hereunder,"
"hereof," "herein," or words of like import, and each reference in the other
documents entered into in connection with the Warrant, shall mean and be a
reference to the Warrant, as amended hereby. Except as specifically amended
above, the Warrant shall remain in full force and effect and is hereby ratified
and confirmed.
4. This Letter Agreement shall be governed by the laws of the State
of Delaware, notwithstanding the conflict-of-law doctrines of Delaware.
5. This Letter Agreement may be executed in counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Please indicate your agreement with the foregoing provisions by
signing this Letter Agreement in the space provided below.
Very truly yours,
GIGA INFORMATION GROUP, INC.
/s/ Xxxxxxx X. Xxxxxxx
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By: Xxxxxxx X. Xxxxxxx
Senior Vice President,
Chief Financial Officer
Acknowledged and agreed to:
RRE GIGA INVESTORS, L.P.
/s/ Xxxxxx Xxxxxx
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By: Xxxxxx Xxxxxx
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