THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO PIPELINE DATA INC. THAT SUCH REGISTRATION IS
NOT REQUIRED.
Right to Purchase 600,000 Shares of Common Stock of
PIPELINE DATA INC.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. _________________ Issue Date: August 31, 2004
PIPELINE DATA INC. a corporation organized under the laws of the State of
Delaware, hereby certifies that, for value received, LAURUS MASTER FUND, LTD.,
or assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the Issue Date of
this Warrant and at any time or from time to time before 5:00 p.m., New York
time, through the close of business August 31, 2011 (the "Expiration Date"), up
to Six Hundred Thousand fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $0.001 par value per share, at the applicable Exercise
Price per share (as defined below). The number and character of such shares of
Common Stock and the applicable Exercise Price per share are subject to
adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Pipeline Data Inc. and any
corporation which shall succeed, or assume the obligations of,
Pipeline Data Inc. hereunder.
(b) The term "Common Stock" includes (i) the Company's Common
Stock, par value $0.001 per share; and (ii) any other securities into
which or for which any of the securities described in (a) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be
as follows:
(i) a price of $1.25 for the first 200,000 shares acquired
hereunder;
(ii) a price of $1.50for the next 200,000 shares acquired
hereunder; and
(iii) a price of $1.75 for any additional shares acquired
hereunder.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date hereof
through and including the Expiration Date, the Holder shall be entitled to
receive, upon exercise of this Warrant in whole or in part, by delivery of
an original or fax copy of an exercise notice in the form attached hereto
as Exhibit A (the "Exercise Notice"), shares of Common Stock of the
Company, subject to adjustment pursuant to Section 4.
1.2 Fair Market Value. For purposes hereof, the "Fair Market Value" of a share
of Common Stock as of a particular date (the "Determination Date") shall
mean:
(a) If the Company's Common Stock is traded on the American Stock Exchange
or another national exchange or is quoted on the National or SmallCap
Market of The Nasdaq Stock Market, Inc.("Nasdaq"), then the closing or
last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the American Stock
Exchange or another national exchange or on the Nasdaq but is traded
on the NASD OTC Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common Stock
is not publicly traded, then as the Holder and the Company agree or in
the absence of agreement by arbitration in accordance with the rules
then in effect of the American Arbitration Association, before a
single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation, dissolution or
winding up, or any event deemed to be a liquidation, dissolution or
winding up pursuant to the Company's charter, then all amounts to be
payable per share to holders of the Common Stock pursuant to the
charter in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the
Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock
then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
1.3 Company Acknowledgment. The Company will, at the time of the exercise of
the Warrant, upon the request of the holder hereof acknowledge in writing
its continuing obligation to afford to such holder any rights to which such
holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the
powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of this Warrant
pursuant to this Section 1.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that
the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder 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 in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part,
and in any event within three (3) business days thereafter, the Company at
its expense (including the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Holder, or as
such Holder (upon payment by such Holder of any applicable transfer taxes)
may direct in compliance with applicable securities laws, a certificate or
certificates for the number of duly and validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which such
Holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value of one full share,
together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2.2 Exercise. Payment may be made either (i) in cash or by certified or
official bank check payable to the order of the Company equal to the
applicable aggregate Exercise Price, (ii) by delivery of the Warrant, or
shares of Common Stock and/or Common Stock receivable upon exercise of the
Warrant in accordance with Section (b) below, or (iii) by a combination of
any of the foregoing methods, for the number of Common Shares specified in
such Exercise Notice (as such exercise number shall be adjusted to reflect
any adjustment in the total number of shares of Common Stock issuable to
the Holder per the terms of this Warrant) and the Holder shall thereupon be
entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.
(b) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or
the portion thereof being exercised) by surrender of this Warrant at
the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the
Holder a number of shares of Common Stock computed using the following
formula:
X=Y (A-B)
---------
---------
A
Where X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being exercised (at the date of such
calculation)
A = the Fair Market Value of one share of the
Company's Common Stock (at the
date of such calculation)
B = Exercise Price (as adjusted to the date
of such calculation)
3. Company Redemption Option. Upon five (5) business days prior notice to
Holder, the Company shall have the right to redeem any unexercised portion
of the Warrant in cash for a price of $0.01 per warrant if (i) the
Company's obligations to the Holder under the Note have been irrevocably
repaid in full; (ii) the average closing price of the Company's Common
Stock is above three hundred percent (300%) of the then applicable Exercise
Price for ten (10) consecutive trading days; and (iii) the Company has
filed a registration statement on Form SB-2 with the Securities Exchange
Commission covering the shares of the Company's Common Stock to be issued
upon the full exercise of this Warrant, and such registration statement has
been declared and remains effective on the date of such notice.
4. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
4.1 Reorganization, Consolidation, Merger, Etc. In case at any time or from
time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in
each such case, as a condition to the consummation of such a transaction,
proper and adequate provision shall be made by the Company whereby the
Holder of this Warrant, on the exercise hereof as provided in Section 1 at
any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and
other securities and property (including cash) to which such Holder would
have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this
Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Section 5.
4.2 Dissolution. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the
Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder
the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrant pursuant to Section
4.1, or, if the Holder shall so instruct the Company, to a bank or trust
company specified by the Holder and having its principal office in New
York, NY as trustee for the Holder of the Warrant (the "Trustee").
4.3 Continuation of Terms. Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may
be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms
of this Warrant as provided in Section 5. In the event this Warrant does
not continue in full force and effect after the consummation of the
transactions described in this Section 4, then the Company's securities and
property (including cash, where applicable) receivable by the Holders of
the Warrant will be delivered to Holder or the Trustee as contemplated by
Section 4.2.
5. Extraordinary Events Regarding Common Stock. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock, or (c) combine its outstanding shares
of the Common Stock into a smaller number of shares of the Common Stock,
then, in each such event, the Exercise Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then Exercise Price
by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Exercise Price then in effect. The Exercise Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5. The number
of shares of Common Stock that the holder of this Warrant shall thereafter,
on the exercise hereof as provided in Section 1, be entitled to receive
shall be increased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 5) be issuable on such exercise by a fraction of which (a) the
numerator is the Exercise Price that would otherwise (but for the
provisions of this Section 5) be in effect, and (b) the denominator is the
Exercise Price in effect on the date of such exercise.
6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable
on the exercise of the Warrant, the Company at its expense will promptly
cause its Chief Financial Officer or other appropriate designee to compute
such adjustment or readjustment in accordance with the terms of the Warrant
and prepare a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or
receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold, (b)
the number of shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Exercise Price and the number of
shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail
a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 12 hereof).
7. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant.
8. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to
the Company demonstrating compliance with applicable securities laws, which
shall include, without limitation, a legal opinion from the Transferor's
counsel that such transfer is exempt from the registration requirements of
applicable securities laws, the Company at its expense but with payment by
the Transferor of any applicable transfer taxes) will issue and deliver to
or on the order of the Transferor thereof a new Warrant of like tenor, in
the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the
Transferor.
9. Replacement of Warrant. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. Registration Rights. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth
in a Registration Rights Agreement entered into by the Company and
Purchaser dated as of even date of this Warrant.
11. Maximum Exercise. The Holder shall not be entitled to exercise this Warrant
on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an
exercise date, and (ii) the number of shares of Common Stock issuable upon
the exercise of this Warrant with respect to which the determination of
this proviso is being made on an exercise date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of
the outstanding shares of Common Stock of the Company on such date. For the
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Notwithstanding the foregoing, the restriction described in
this paragraph may be revoked upon 75 days prior notice from the Holder to
the Company and is automatically null and void upon an Event of Default
under the Note.
12. Warrant Agent. The Company may, by written notice to the each Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 8, and replacing this Warrant
pursuant to Section 9, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred on the
books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to
the contrary.
14. Notices, Etc. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished
to the Company in writing by such Holder or, until any such Holder
furnishes to the Company an address, then to, and at the address of, the
last Holder of this Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be governed by and construed in
accordance with the laws of State of New York without regard to principles
of conflicts of laws. Any action brought concerning the transactions
contemplated by this Warrant shall be brought only in the state courts of
New York or in the federal courts located in the state of New York;
provided, however, that the Holder may choose to waive this provision and
bring an action outside the state of New York. The individuals executing
this Warrant on behalf of the Company agree to submit to the jurisdiction
of such courts and waive trial by jury. The prevailing party shall be
entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform to such statute or rule
of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other
provision of this Warrant. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms
hereof. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision. The
Company acknowledges that legal counsel participated in the preparation of
this Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Warrant to favor any party against
the other party.
[Balance of page intentionally left blank;
signature page follows.]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
PIPELINE DATA INC.
WITNESS:
By:
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Name: XxxXxxxxxxx Xxxxx
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Title: CEO
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A-1
408830-5
Exhibit A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
To: Pipeline Data Inc.
00 Xxxx Xxxx Xxxxxx,
Xxxxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx,
Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):
________ shares of the Common Stock covered by such Warrant; or
the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
$__________ in lawful money of the United States; and/or the
cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock
(using a Fair Market Value of $_______ per share for
purposes of this calculation); and/or the cancellation of
such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2.2, to
exercise this Warrant with respect to the maximum number of
shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to ______________________________________________
whose address is .
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
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(Signature must conform to name of holder as specified on
the face of the Warrant)
Address:
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B-1
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Pipeline Data Inc. into which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Pipeline Data Inc. with full power of substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
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Dated:
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(Signature must conform to name of holder as specified on
the face of the Warrant)
Address:
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SIGNED IN THE PRESENCE OF:
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(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
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(Name)
