EXHIBIT 10.7
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF (THESE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION
UNDER SUCH LAWS, TOGETHER WITH, IN CERTAIN CASES, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN VOTING AGREEMENTS AS SET FORTH IN A STOCKHOLDERS AGREEMENT, AS
AMENDED FROM TIME TO TIME, BY AND AMONG THE REGISTERED OWNER OF THIS
CERTIFICATE, THE COMPANY AND CERTAIN OTHER HOLDERS OF SECURITIES OF THE
COMPANY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE
SECRETARY OF THE COMPANY.
XXX.XXX, INC.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
Date of Issuance: October 7, 2004 Certificate No. ________
THIS CERTIFIES THAT, for value received, [________________________] and its
assigns are entitled to subscribe for and purchase [________] shares of duly
authorized, validly issued, fully paid and nonassessable Common Stock ((the
"Common Stock") as adjusted pursuant to Section 4 hereof, the "Shares") of
XXX.XXX, INC., a Delaware corporation (the "Company"), at the Change of Control
Price (as defined below) per share (such price and such other price as shall
result, from time to time, from the adjustments specified in Section 4 hereof is
herein referred to as the "Warrant Price"), subject to the provisions and upon
the terms and conditions hereinafter set forth. As used herein the term "Date of
Grant" shall mean October 7, 2004. The term "Warrant" as used herein shall be
deemed to include any warrants issued upon transfer or partial exercise of this
Warrant unless the context clearly requires otherwise.
This Warrant is one of the several warrants of like tenor (collectively,
the "2004 Warrants") originally issued by the Company on October 7, 2004
representing in the aggregate the right to purchase 19,142,999 shares of the
Company's Common Stock pursuant to the terms herein and therein.
1. Term. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time and from time to time, during the period
immediately following the date of the consummation of a Qualifying Change of
Control (as defined below) of the Company through July 18, 2006 (the "Exercise
Period").
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2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, the purchase right represented by this Warrant may be exercised by the
holder hereof only following a Qualifying Change of Control of the Company by
(a) the surrender of this Warrant (with the notice of exercise substantially in
the form attached hereto as Exhibit A-1 duly completed and executed) at the
principal office of the Company and the payment to the Company, by certified or
bank check, or by wire transfer to an account designated by the Company (a "Wire
Transfer") of an amount equal to the then applicable Warrant Price multiplied by
the number of Shares then being purchased, or (b) if in connection with a
registered public offering of the Company's securities, the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly
completed and executed) at the principal office of the Company together with
notice of arrangements reasonably satisfactory to the Company for payment to the
Company either by certified or bank check or by Wire Transfer from the proceeds
of the sale of shares to be sold by the holder in such public offering of an
amount equal to the then applicable Warrant Price per share multiplied by the
number of Shares then being purchased, or (c) exercise of the "net issuance"
right provided for in Section 10.2 hereof, or (d) the tender of all or a portion
of a Senior Secured Promissory Note issued by the Company pursuant to the Note
and Warrant Purchase Agreement dated as of July 18, 2003 (the "Purchase
Agreement") in a principal amount equal to the then applicable Warrant Price
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing the 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 practicable and, if requested by the
holder of this Warrant, the Company shall cause its transfer agent to deliver
the certificate representing Shares issued upon exercise of this Warrant to a
broker or other person (as directed by the holder exercising this Warrant)
within the time period required to settle any trade made by the holder after
exercise of this Warrant. A "Qualifying Change of Control" of the Company shall
mean: (1) an acquisition involving the Company and another entity or group of
entities by means of any transaction or series of related transactions
(including, without limitation, any reorganization, recapitalization, tender
offer, merger or consolidation) if, following such transaction, the holders of
the outstanding voting power of the Company prior to the transaction cease to
hold, directly or indirectly, a majority of the outstanding voting power of the
surviving entity or (2) a sale of all or substantially all of the assets of the
Company; in each case resulting in a Change of Control Price (as defined below)
in an amount per share less than the then applicable per share exercise price of
the warrants (collectively, the "2003 Warrants") issued by the Company to the
holder hereof and to other investors on August 12, 2003 or December 9, 2003. For
purposes hereof, the amount of consideration per share of Common Stock payable
to, or retained by, the holders of the issued and outstanding shares of Common
Stock of the Company in a Qualifying Change of Control shall be deemed equal to
the following (the "Change of Control Price"): (i) the per share consideration
specified in the acquisition or other agreement governing such Qualifying Change
of Control (the "Acquisition Agreement"), or, if the Qualifying Change of
Control is a transaction contemplated by clause (iii) below, the value per share
of the Company's Common Stock as specified in the Acquisition Agreement, (ii) if
the per share consideration is not specified in the Acquisition Agreement and
consideration consists solely of common stock of the acquiring entity, the
product
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resulting from the Fair Market Value of a share of such stock as determined
pursuant to Section 10.2(c)(ii) hereof (with the Determination Date being the
date prior to the public announcement of the Qualifying Change of Control
transaction), multiplied by the per share exchange ratio set forth in the
Acquisition Agreement, (iii) if the per share value of the Company's Common
Stock is not specified in the Acquisition Agreement and the Common Stock of the
Company held by the stockholders of the Company immediately prior to the
Qualifying Change of Control continues to be held by such stockholders following
such transaction, the Fair Market Value of a share of Common Stock determined
pursuant to Section 10.2(c)(ii) hereof (with the Determination Date being the
date prior to the public announcement of the Qualifying Change of Control
transaction) or (iv) if clauses (i), (ii) or (iii) are not applicable, the Fair
Market Value of the consideration on a per share basis as determined pursuant to
Section 10.2(c)(ii) hereof (with the Determination Date being the date prior to
the public announcement of the Qualifying Change of Control transaction).
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Reclassification or Merger. In case of any reclassification or
change of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the
Company is the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise
of this Warrant), and subject to Section 9 of this Warrant, the Company, or
such surviving corporation, as the case may be, shall duly execute and
deliver to the holder of this Warrant a new Warrant (which, if not in
substantially the form of this Warrant, shall be in form and substance
satisfactory to the holder of this Warrant), or the Company shall make
appropriate provision without the issuance of a new Warrant, so that the
holder of this Warrant shall have the right to receive upon exercise of
this Warrant, at a total purchase price not to exceed that payable upon the
exercise of the then unexercised portion of this Warrant, and in lieu of
the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money
and property receivable upon such reclassification, change or merger by a
holder of the number of shares of Common Stock purchasable under this
Warrant immediately preceding the consummation of such reclassification or
merger. Such new Warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this subparagraph (a) shall similarly
apply to successive reclassifications, changes and mergers.
(b) Subdivision or Combination of Shares.
(i) If the Company, at any time prior to a Qualifying Change of Control and
while this Warrant remains outstanding and unexpired, shall subdivide (including
by way of a stock dividend) or combine its outstanding shares of Common Stock,
the number of Shares issuable hereunder shall be proportionately increased in
the case of a subdivision and proportionately decreased in the case of a
combination.
(ii) If the Company, at any time following a Qualifying Change of Control
and while this Warrant remains outstanding and unexpired shall, subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased and the number of Shares issuable hereunder shall be
proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at any
time following a Qualifying Change of Control and while this Warrant is
outstanding and unexpired shall (i) pay a dividend with respect to its
Common Stock payable in Common Stock, then the Warrant Price shall be
adjusted, from and after the record date fixed for the determination of the
shareholders of the Company entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (A)
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (B) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; or (ii) make
any other distribution with respect to Common Stock (except any
distribution specifically provided for in Sections 4(a) and 4(b)), then, in
each such case, provision shall be made by the Company such that the holder
of this Warrant shall receive upon exercise of this Warrant a proportionate
share of any such dividend or distribution as though it were the holder of
the Shares as of the record date fixed for the determination of the
shareholders of the Company entitled to receive such dividend or
distribution.
(d) Adjustment for Issuance of Shares of Common Stock Below Warrant
Price. If following a Qualifying Change of Control, the Company shall
issue, or be deemed to issue (as provided below), any additional shares of
Common Stock other than Excluded Stock, as defined below ("Additional
Shares of Common Stock"), for a consideration per share less than the
Warrant Price in effect immediately prior to the issuance of such
Additional Shares of Common Stock (excluding stock splits, stock dividends,
combinations, reclassifications and capital reorganizations which are
covered in Sections 4(a), 4(b) and 4(c) above), the Warrant Price shall be
reduced concurrent with each such issuance to a price calculated as
follows:
Adjusted Warrant Price = (Outstanding Stock x Warrant Price) + Additional Stock
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Consideration
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Outstanding Stock + No. of Additional Shares of Common Stock
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As used herein:
"Additional Stock Consideration" means the consideration received by the Company
upon the issuance of the Additional Shares of Common Stock.
"Convertible Securities" means any evidence of indebtedness, shares or
securities, in each case convertible into or exchange for Additional Shares of
Common Stock.
"Excluded Stock" means; (a) securities issued, or deemed issued (as provided
below), to directors, officers, employees or consultants of the Company or a
subsidiary of the Company in connection with their service as directors of the
Company or a subsidiary of the Company, their employment by the Company or a
subsidiary of the Company or their retention as consultants by the Company or a
subsidiary of the Company under the Company's Amended and Restated 1999 Stock
Plan, the Vector Internet Services Inc. 1997 Stock Option Plan, the Vector
Internet Services Inc. 1999 Stock Option Plan, the Company's 1999 Employee Stock
Purchase Plan, the Company's Amended and Restated 2001 Stock Option and
Incentive Plan, or that certain Stock Option Agreement dated April 15, 2004,
between the Company and Xxxxx X. Xxxxxx (the "Plans"), plus such additional
number of shares issued or issuable to directors, officers, employees or
consultants of the Company or a subsidiary of the Company under any amendment of
the Plans, or under other plans, adopted or assumed by the Company with the
approval of the Board of Directors of the Company, plus such number of shares of
Common Stock which are repurchased by the Company from such persons pursuant to
contractual rights held by the Company and at repurchase prices not exceeding
the respective original purchase prices paid by such persons to the Company
therefor; (b) shares of Common Stock issuable upon exercise of warrants
outstanding as of the date hereof; (c) shares of Common Stock issued, or deemed
issued (as provided below), pursuant to a merger, consolidation or stock or
asset acquisition approved by the Company's Board of Directors; (d) shares of
Common Stock issued as payment of interest in accordance with the terms of the
Notes issued pursuant to the Purchase Agreement; (e) shares of Common Stock
issued upon conversion of the Secured Minimum Borrowing Note and the Secured
Revolving Note and exercise of the Common Stock Purchase Warrant, each issued by
the Company to Laurus Master Fund, Ltd and dated August 31, 2004, and shares
issued upon exercise of the Warrant to purchase up to 143,000 shares of Common
Stock to be issued by the Company to TN Capital Equities, Ltd; and (f) the
issuance, or deemed issuance, of securities of the Company for any purpose and
in any amount as approved by the Company's Board of Directors, including the
approval of (i) at least one of the VantagePoint Directors (as defined in the
Second Amended and Restated Stockholders Agreement dated, as of July 22, 2004
among the Company and the Investors named therein (the "Stockholders
Agreement")), if any, and (ii) the Warrant Investor Director (as defined in the
Stockholders Agreement), if any.
"Options" means rights, options or warrants to subscribe for, purchase or
otherwise acquire shares of Common Stock or Convertible Securities.
"Outstanding Stock" means the total number of shares of Common Stock outstanding
plus the total number of shares of Common Stock issuable upon conversion or
exercise of outstanding Convertible Securities (including this Warrant and all
other warrants) immediately prior to the issuance of the Additional Shares of
Common Stock; provided that the number of shares of Common Stock
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outstanding at any given time shall not include shares owned or held by or for
the account of the Company.
No adjustment in the Warrant Price need be made if such adjustment would result
in a change in the Warrant Price of less than $0.01. Any such adjustment which
is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in the Warrant Price. No adjustment in the
Warrant Price of this Warrant shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for such
Additional Shares of Common Stock issued or deemed to be issued (as provided
below) by the Company is less than the Warrant Price then in effect on the date
of, and immediately prior to, such issue, for this Warrant.
For purposes of making any adjustment required under this Section 4(d), the
consideration received by the Company for any issue or sale of securities shall
(a) to the extent that it consists of cash be computed as the amount of cash
received by the Company without deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale, (b) to the extent that it consists of
property other than cash, be computed at the fair market value of that property
as determined in good faith by the Board of Directors of the Company, and (c) if
Additional Shares of Common Stock, Convertible Securities or right or Options
are issued or sold together with other securities or other assets of the Company
for a consideration which covers both, be computed (as provided in clauses (a)
and (b) above) as the portion of the consideration so received that may be
reasonably determined in good faith by the Company's Board of Directors to be
allocable to such Additional Shares of Common Stock, Convertible Securities or
rights or Options.
If the holders of a majority-in-interest of the warrants issued pursuant to the
Purchase Agreement shall, in good faith, disagree with any determination made by
the Board of Directors of the Company of the fair market value of any property
(including without limitation any securities other than shares of Common Stock)
pursuant to the warrants issued pursuant to the Purchase Agreement (such holders
hereinafter referred to as the "Requesting Holders"), and such disagreement is
in respect of property valued by the Board of Directors of the Company at more
than $500,000, then the Requesting Holders may by written notice to the Company
(an "Appraisal Notice"), given within 15 days after notice to the holders of the
warrants issued pursuant to the Purchase Agreement following such determination,
elect to contest such determination; provided, however, that the holders of the
warrants issued pursuant to the Purchase Agreement may not seek appraisal or any
determination of fair market value to the extent that the Company has received a
fairness opinion or other appraisal from an independent appraiser selected by
the Board of Directors of the Company (including the Warrant Investor Director,
if any) in connection with the transaction giving rise to such determination.
Within 15 days after an Appraisal Notice, the Company shall engage an Appraiser
to make an independent determination of such fair market value (the "Appraiser's
Determination"), and to deliver to the Company and the holder of this Warrant a
report describing its methodology and results in reasonable detail within 15
days of such engagement. The Company and the holder of this Warrant shall be
afforded reasonable opportunities to discuss the appraisal with the Appraiser.
The Appraiser's Determination shall be final and binding on the Company and the
holder of this Warrant, absent manifest error. The costs of conducting an
appraisal, including all fees and expenses of the Appraiser, shall be borne one
half by the Requesting Holders (among the Requesting Holders, pro
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rata according to the number of shares issuable upon exercise of outstanding
warrants issued under the Purchase Agreement that are held by the Requesting
Holders) and one half by the Company. "Appraiser" means an independent appraiser
chosen by the Board of Directors of the Company with the consent of the
Requesting Holder with the greatest number of shares of Common Stock issuable
upon exercise of the warrants issued pursuant to the Purchase Agreement, which
consent shall not be unreasonably withheld or delayed.
For purposes of the adjustment required under this Section 4(d), if at any time
or from time to time after the Date of Grant, the Company issues or sells any
Options or Convertible Securities, then in each case the Company shall be deemed
to have issued at the time of the issuance of such Options or Convertible
Securities the maximum number of Additional Shares of Common Stock (as set forth
in the instruments relating thereto, giving effect to any provision contained
therein for a subsequent upward adjustment of such number) issuable upon
exercise or conversion thereof and to have received as consideration for the
issuance of such shares of Common Stock an amount equal to the total amount of
consideration, if any, received by the Company for the issuance of such Options
or Convertible Securities plus, in the case of such Options, the minimum amounts
of consideration, if any (as set forth in the instruments relating thereto,
giving effect to any provision contained therein for a subsequent downward
adjustment of such consideration), payable to the Company upon the exercise of
such Options and, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company upon the subsequent conversion of
any such Convertible Security (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities). No further adjustment of
the Warrant Price, adjusted upon the issuance of such Options or Convertible
Securities, shall be made as a result of the actual issuance of Additional
Shares of Common Stock on the exercise of any such Options or the conversion of
any such Convertible Securities. If any such Options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the Warrant Price adjusted upon the issuance of such Options or
Convertible Securities shall be readjusted to the Warrant Price which would have
been in effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold for the consideration received by the Company for
the granting of all such Options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.
Upon the happening of any of the following events, namely, if the purchase price
provided for in any Option, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities, or the rate at which
Convertible Securities are convertible into or exchangeable for Common Stock
shall change at any time (including, but not limited to, changes under or by
reason of provisions designed to protect against dilution), the Warrant Price in
effect at the time of such event shall forthwith be readjusted to the Warrant
Price which would have been in effect at such time had such 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, but only if as a result of such
adjustment the Warrant Price then in effect hereunder is thereby reduced; and on
the termination of any such Option or any such right to convert or exchange such
Convertible Securities, the Warrant Price then in effect hereunder shall
forthwith be increased to the Warrant Price which would have
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been in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall
be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter. In
no event shall any further adjustment to the Warrant Price or number of
shares issuable upon exercise of this Warrant be made pursuant to this
Section 4(e) in connection with an event resulting in an adjustment in the
Warrant Price and/or the number of Shares issuable upon exercise of this
Warrant pursuant to Sections 4(a), (b), (c) or (d) of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant at such holder's last known address.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as reasonably determined in good faith
by the Company's Board of Directors.
7. Compliance with Securities Act;
Disposition of Warrant or Shares of Common Stock.
(a) Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the Shares to be issued
upon exercise hereof are being acquired for investment and that such holder
will not offer, sell or otherwise dispose of this Warrant, or any Shares
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"), or any applicable state
securities laws. Upon exercise of this Warrant, unless the Shares being
acquired are registered under the Act and any applicable state securities
laws or an exemption from such registration is available, the holder hereof
shall confirm in writing that the Shares so purchased are being acquired
for investment and not with a view toward distribution or resale in
violation of the Act and shall confirm such other matters related thereto
as may be reasonably requested by the Company. This Warrant and all Shares
issued upon exercise of this Warrant (unless registered under the Act and
any applicable state securities laws) shall be stamped or imprinted with a
legend in substantially the following form:
These securities have not been registered under the Securities Act of 1933,
as amended, or any state securities laws. They may not be sold, offered for
sale,
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pledged or hypothecated in the absence of a registration statement in
effect with respect to the securities under such Act and any applicable
state securities laws or pursuant to an exemption under such laws, together
with, in certain cases, an opinion of counsel reasonably satisfactory to
the Company that such registration is not required.
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant, and will acquire the Shares issuable upon exercise of
this Warrant, for its own account for investment purposes only and not with a
view to, or for the resale in connection with, any "distribution" thereof in
violation of the Act; provided, however, that, subject to compliance with the
terms of the Purchase Agreement, the Stockholders Agreement and applicable law,
the disposition of such holder's property shall at all times be within its
control.
(2) The holder understands that neither this Warrant nor the Shares
issuable upon exercise of this Warrant have been registered under the Act in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the holder's investment intent as
expressed herein.
(3) The holder further understands that this Warrant and the Shares
issuable upon exercise of this Warrant must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable state
securities laws, or unless exemptions from registration and qualification are
otherwise available. The holder is aware of the provisions of Rule 144,
promulgated under the Act and that the Company has no obligation to register
this Warrant under the Act or to qualify this Warrant under any applicable state
securities laws.
(4) The holder is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares,
the holder hereof agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written
opinion of such holder's counsel, or other evidence reasonably satisfactory
to the Company, to the effect that such offer, sale or other disposition
may be effected without registration or qualification (under the Act as
then in effect or any federal or state securities law then in effect) of
this Warrant or the Shares and indicating whether or not under the Act
certificates for this Warrant or the Shares to be sold or otherwise
disposed of require any restrictive legend as to applicable restrictions on
transferability in order to ensure compliance with such law. Upon receiving
such written notice and reasonably satisfactory opinion or other evidence,
the Company, as promptly
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as practicable but no later than fifteen (15) days after receipt of the
written notice, shall notify such holder that such holder may sell or
otherwise dispose of this Warrant or such Shares, all in accordance with
the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 7(b) that the opinion of counsel for the
holder or other evidence is not reasonably satisfactory to the Company, the
Company shall so notify the holder promptly with details thereof after such
determination has been made. Notwithstanding the foregoing, this Warrant or
such Shares may, as to such federal laws, be offered, sold or otherwise
disposed of in accordance with Rule 144 under the Act, provided that the
Company shall have been furnished with such information as the Company may
reasonably request to provide a reasonable assurance that the provisions of
Rule 144 have been satisfied. Each certificate representing this Warrant or
the Shares thus transferred (except a transfer pursuant to Rule 144 or
144A) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any
legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer of, or grant of a security interest in, this
Warrant (or the Common Stock obtainable upon exercise thereof) or any part
hereof (i) to a partner of the holder if the holder is a partnership or to
a member of the holder if the holder is a limited liability company, (ii)
to a partnership of which the holder is a partner or a limited liability
company of which the holder is a member, or (iii) to any affiliate of the
holder if the holder is a corporation; provided, however, in any such
transfer, if applicable, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
holder hereof.
8. Rights as Shareholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
Notwithstanding the foregoing, the Company will transmit to the holder of this
Warrant such information, documents and reports as are generally distributed to
the holders of any class or series of the securities of the Company for which
this warrant is then exercisable concurrently with the distribution thereof to
the shareholders.
9. Affirmative Covenants. The Company covenants to the holder that it will
use commercially reasonable best efforts to cause any acquiring entity or group
of entities in a Qualifying Change of Control transaction, in which the Company
is not the surviving entity and in which the consideration paid in such
transaction is not common stock, to assume this Warrant and all of the Company's
obligations hereunder and, in such case, this Warrant shall become a warrant
exercisable (A) at the new Warrant Price per share equal to the fair market
value of one share of acquirer's common stock determined in accordance with
Section 10.2(c) (with the Determination
10
Date being the date prior to the public announcement of the Qualifying Change of
Control transaction )(such price being the "Acquirer Stock Price"); and (B) for
that number of shares of common stock of the acquirer equal to the number
resulting from the product of (X) multiplied by (Y), where (X) equals the number
of shares of Common Stock subject to this Warrant immediately prior to the
Qualifying Change of Control and (Y) equals the quotient of (I) the Change of
Control Price, divided by (II) the Acquirer Stock Price. The Company shall also
use commercially reasonable efforts to cause the acquirer to provide
registration rights in respect to the common stock issuable upon exercise of the
new warrant as prescribed by Section 25 hereof. In the event that this Warrant
is assumed by an acquiring entity or group of entities, thereafter, the term
"Company" shall refer to the entity whose shares of common stock will be
issuable upon exercise of this Warrant and the term "Common Stock" shall refer
to such entity's common stock.
10. Additional Rights.
10.1 Notice of Corporate Action. In the event the Company proposes to:
(i) pay, distribute, or take a record of the holders of its Common Stock for the
purpose of determining the holders thereof who are entitled to receive, any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of capital stock or any other securities or
property, or (ii) consummate any capital reorganization, reclassification,
recapitalization, consolidation, merger, transfer of all or substantially all of
the Company's assets, dissolution, liquidation or winding-up, or any similar
transaction, then, at least 10 days prior to the earlier of any applicable
record date or such event, as the case may be, the Company shall mail to the
holder of this Warrant a notice specifying: (a) the date or expected date on
which any such payment or distribution is to be made or record is to be taken
and the amount and character of any such dividend, distribution or right; (b)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation,
winding-up or similar transaction is to take effect and any record date
therefor; (c) the time as of which any holders of record of shares of Common
Stock and/or any other class of securities shall be entitled to exchange their
shares of Common Stock and/or other securities for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation,
winding-up or similar transaction and a description in reasonable detail of such
transaction; and (d) in each case, the expected effect on the Warrant Price of
each such transaction or event. The Company shall update any such notice to
reflect any change in the foregoing information.
10.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the rights
of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion
Right") into shares of Common Stock as provided in this Section 10.2 at any
time or from time to time during the Exercise Period. Upon exercise of the
Conversion Right with respect to a particular number of Shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to
the holder (without payment by the holder of any exercise price or any cash
or other consideration) that number of shares of fully paid and
nonassessable Common Stock as is determined according to the following
formula:
11
X = B - A
-----
Y
Where: X = the number of shares of Common Stock to be issued
to the holder upon such exercise
Y = the fair market value of one share of Common Stock
A = the aggregate Warrant Price of the specified
number of Converted Warrant Shares immediately
prior to the exercise of the Conversion Right
(i.e., the number of Converted Warrant Shares
multiplied by the Warrant Price)
B = the aggregate fair market value of the
specified number of Converted Warrant Shares
(i.e., the number of Converted Warrant Shares
multiplied by the fair market value of one
Converted Warrant Share)
No fractional shares shall be issuable upon exercise of the Conversion Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the
Company together with a written statement (which may be in the form of
Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in
Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the
Company of this Warrant together with the aforesaid written statement, or
on such later date as is specified therein (the "Conversion Date"), and, at
the election of the holder hereof, may be made contingent upon the closing
of the sale of the Company's Common Stock to the public in a public
offering pursuant to a Registration Statement under the Act (a "Public
Offering"). Certificates for the Shares issuable upon exercise of the
Conversion Right and, if applicable, a new Warrant evidencing the balance
of the Shares remaining subject to this Warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder within thirty (30)
days following the Conversion Date.
(c) Determination of Fair Market Value. For purposes of this Section
10.2, "fair market value" of a share of Common Stock of the Company or a
share of common stock of another corporation as of a particular date (the
"Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the Securities and Exchange Commission, then the initial "Price to
Public" specified in the final prospectus with respect to such offering.
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(ii) If the Conversion Right is not exercised in connection with and
contingent upon a Public Offering, then as follows:
(A) If traded on the American Stock Exchange or other securities
exchange or the Nasdaq National Market, the fair market value of such
security shall be deemed to be the average of the closing prices of
such security on such exchange or market over the five trading days
immediately prior to the Determination Date;
(B) If traded on the Nasdaq Stock Market (other than the Nasdaq
National Market) or other over-the-counter system, the fair market
value of such security shall be deemed to be the average of the closing
bid prices of such security over the five trading days immediately
prior to the Determination Date; and
(C) If there is no public market for such security or if the
consideration being valued is other than common stock, then fair market
value shall be determined by (i) mutual agreement of the holders of a
majority-in-interest of the warrants issued pursuant to the Purchase
Agreement who are then seeking to exercise their Conversion Rights (the
"Converting Holders") and the Company or (ii) if no such mutual
agreement can be reached within 15 days, then the higher of (a) the
book value of a share of the Common Stock or such other consideration
as determined by a firm of independent public accountants selected
(within 10 days after the failure of the Company and the Converting
Holders to reach mutual agreement) by the Board of Directors of the
Company with the consent of the holders of the majority-in-interest of
the warrants issued pursuant to the Purchase Agreement that are
beneficially owned by Converting Holders, which consent shall not be
unreasonably withheld or delayed, as at the last day of any month
ending within 60 days preceding the date as of which the determination
is to be made (such determination of the independent public accountant
to be completed within 30 days after such independent public accountant
is chosen by the Company and the Converting Holders) or (b) the fair
value thereof determined in good faith by an independent appraiser
(chosen within 10 days after the failure of the Company and the
Converting Holders to reach mutual agreement by the Board of Directors
of the Company with the consent of the Converting Holder exercising the
Conversion Right with respect to the greatest number of shares, which
consent shall not be unreasonably withheld or delayed) as of a date
which is within 15 days of the date as of which the determination is to
be made (such determination of the independent appraiser to be
completed within 30 days after such independent appraiser is chosen by
the Company and the Converting Holders); provided, that the
determination of the Fair Market Value of any contingent or deferred
consideration payable in connection with a Qualifying Change of Control
shall be determined on a present value basis. The fees and expenses of
any such independent public accountant or independent appraiser shall
be borne one half by the Converting Holders (among the Converting
Holders, pro rata according to the number of shares for which
Conversion Rights are being exercised) and one half by the Company.
If closing prices or closing bid prices are no longer reported by a securities
exchange or other trading system, the closing price or closing bid price shall
be that which is reported by such securities exchange or other trading system at
4:00 p.m. New York City time on the applicable trading day.
13
10.3 Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Shares subject hereto and is otherwise
exercisable pursuant to Section 1 hereof, and if the fair market value of one
share of the Common Stock is greater than the Warrant Price then in effect, this
Warrant shall be deemed automatically exercised pursuant to Section 10.2 above
(even if not surrendered) immediately before its expiration. For purposes of
such automatic exercise, the fair market value of one share of Common Stock upon
such expiration shall be determined pursuant to Section 10.2(c). To the extent
this Warrant or any portion thereof is deemed automatically exercised pursuant
to this Section 10.3, the Company agrees to promptly notify the holder hereof of
the number of Shares, if any, the holder hereof is to receive by reason of such
automatic exercise.
11. Representations and Warranties. The Company represents and warrants to
the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws relating to bankruptcy,
insolvency, the relief of debtors or creditors' rights generally and the
rules of law or principles at equity governing specific performance,
injunctive relief and other equitable remedies;
(b) The Shares have been duly authorized and reserved for issuance by
the Company as of the Date of Grant and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable;
(c) The execution and delivery of this Warrant as of the Date of
Grant, and the issuance of the Shares upon exercise of this Warrant in
accordance with the terms hereof (i) are not and will not be, inconsistent
with the Company's certificate of incorporation or by-laws, (ii) assuming
the holder's representations to the Company set forth in Section 7(a) are
true and complete, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, (iii) do
not and will not conflict with or contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound, and
(iv) assuming the holder's representations to the Company set forth in
Section 7(a) are true and complete, do not and will not require the consent
or approval of, the giving of notice to, the registration or filing with or
the taking of any action in respect of or by, any Federal, state or local
government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will
be effected by the time required thereby; and
(d) As of the Date of Grant, there are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a
material adverse effect on the ability of the Company to perform its
obligations under this Warrant.
14
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document required
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to each such holder at its address as shown on the books of the Company or to
the Company at the address indicated therefor on the signature page of this
Warrant with a copy to the General Counsel at the same address and with another
copy to Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxxx, XX 00000,
Attention: Xxxx X. Xxxxxxx, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger or consolidation and all of the
obligations of the Company relating to the Shares issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and permitted assigns of
the holder hereof.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
15
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
certificate of incorporation or through any other means, 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 in order to protect
the rights of the holder of this Warrant against impairment.
21. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
24. Stockholder Approval. Notwithstanding any provision in this Warrant to
the contrary, the holder of this Warrant hereby acknowledges and agrees that all
obligations of the Company and all rights of the holder hereunder shall be of no
force or effect unless and until this Warrant and the issuance of shares of
Common Stock upon exercise of this Warrant shall have been approved by the
stockholders of the Company. The Company covenants to recommend to, and solicit
the approval of, the Company's stockholders of the issuance of this Warrant and
the shares of Common Stock issuable upon exercise hereof at the next regularly
scheduled meeting of the stockholders of the Company. Notwithstanding the
foregoing, in the event that the Company calls a special stockholders meeting to
be held prior to the next regularly scheduled meeting of stockholders for the
purpose, among other things, of authorizing or approving any Qualifying Change
of Control transaction, the Company covenants to include in its proxy statement
for such meeting its recommendation and solicitation of stockholder approval at
such special meeting of the issuance of this Warrant and the shares of Common
Stock issuable upon exercise hereof.
25. Registration Rights. The shares of Common Stock issued, to be issued or
issuable upon exercise of the this Warrant shall carry with them and afford to
the holder thereof all of the registration rights provided to holders of
"Registrable Securities" under, and as defined in, Article III of the Amended
and Restated Stockholders Agreement (the "Stockholders Agreement") dated as of
July 22, 2004, by and among the Company, the holder of this Warrant and the
other parties thereto, as if such shares were deemed Registrable Securities
thereunder, subject to any limitation on participation in any piggy-back
registration in respect to any registration rights granted by the
16
Company in respect to shares of its Common Stock pursuant to any agreement
executed prior to the date hereof that, by its terms, would not permit the
inclusion of the shares of Common Stock issuable upon exercise of this Warrant
in a registration statement filed pursuant to such agreement. Notwithstanding
the forgoing, demand registration rights may only be exercised by one or more
holders of at least 50% of the shares of Common Stock issued, to be issued or
issuable upon exercise of the 2004 Warrants.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in
its corporate name by its duly authorized officer and to be dated as of the Date
of Grant set forth on the first page to this Warrant.
XXX.XXX, INC.
By: /s/ Xxxxxx X. XxXxxxxx
----------------------------
Name: Xxxxxx X. XxXxxxxx
Title: Chief Financial Officer
Address: 000 Xxxx Xxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
ACCEPTED AND AGREED TO BY:
-------------------------
By: _____________________
Name: ___________________
Title: __________________
Address: ________________
EXHIBIT A-1
NOTICE OF EXERCISE
TO: XXX.XXX, INC. (the "Company")
1. The undersigned hereby:
|_| elects to purchase shares of Common Stock of the Company pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
|_| elects to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to shares of ---- Common Stock.
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:
________________________________
(Name)
________________________________
________________________________
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.
________________________________
(Signature)
________________________________
(Date)
A-2
EXHIBIT A-2
NOTICE OF EXERCISE
TO: XXX.XXX, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S, (File No. ______________) which was filed with the
Securities and Exchange Commission on ____________, 20__, the undersigned
hereby:
|_| elects to purchase ________ shares of Common Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant, or
|_| elects to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to Shares of ________ Common Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such ________ shares.
3. The undersigned has instructed the custodian for the selling shareholders to
deliver to the Company $ or, if less, the net proceeds due the undersigned from
the sale of shares in the aforesaid public offering. If such net proceeds are
less than the purchase price for such shares, the undersigned agrees to deliver
the difference to the Company prior to the Closing.
________________________________
(Name)
________________________________
________________________________
(Address)
________________________________
(Date)
A-3
