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EXHIBIT 10.32
NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after August 18, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Xxxx X. Xxxxxxx, (the "Holder") or its registered
assigns is entitled to purchase from Chaparral Network Storage, Inc., a Delaware
corporation (the "Company") up to twenty thousand (20,000) fully paid and
nonassessable shares of Common Stock, $0.001 par value, of the Company (as
adjusted pursuant to Section 7 hereof, the "Shares") at the purchase price per
share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with
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the 1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.125 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for
a term beginning on August 19, 1999, (the "Commencement Date") and ending on
August 18, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto as Appendix I, to
the Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X= the number of Shares to be issued to the Holder.
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Y= the number of Shares purchasable under this Warrant (at the date of
such exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(d) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of
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this Warrant for the full number of Shares specified herein and the conversion
of the Shares into Common Stock. The Company further covenants that such Shares,
when issued pursuant to the exercise of this Warrant, will, upon issuance, be
duly and validly issued, fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer
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or assignment, the assignor or transferor shall reimburse the Company for its
reasonable expenses, including transfer taxes and attorneys' fees, incurred in
connection with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from the Holder a written request that the Company file a
registration statement under the 1933 Act with respect to shares of Registrable
Securities having an expected aggregate offering price of at least One Million
Dollars ($1,000,000), the Company will, subject to the limitations of Section
9(a)(ii), use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the
closing date of the Company's first registered public offering of its stock
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good
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faith and using all reasonable efforts to cause such initial registration
statement to become effective;
(D) After the Company has effected one (1)
such registration pursuant to a Holder's demand under this Section 10(a)(i),
which registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii),
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use its best efforts to cause to be registered under the 1933 Act all of the
Registrable Securities that the Holder has requested to be registered. The
Company shall be required to effect not more than three (3) such registrations
of Registrable Securities pursuant to the request of the Holder under this
Section 10(b).
(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
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expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing underwriter of such offering. The Holder
shall also enter into and perform its obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. In such instance, Company shall use its best efforts to cure any such
statement or omission so as to render such statement or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
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(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as defined in the 0000 Xxx) for the Holder and each
person, if any, who controls the Holder or underwriter within the meaning of the
1933 Act or the 1934 Act, against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the 1933 Act, the 1934
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto; (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any state securities
law; and the Company will reimburse the Holder, officer, director or partner,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
Company's indemnity contained in this Section 10(g) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished in writing and expressly stated
for use in connection with such registration by the Holder, or the Holder's
officers, directors or partners, underwriter, or controlling person. The Company
shall not be required to indemnify any person against any liability arising (i)
from any untrue or misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final prospectus or (ii) out
of the failure of any person to deliver a prospectus as required by the 1993
Act. The indemnity provided for in this Section 10(g) shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such
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losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by the Holder expressly stated in a writing for
use in connection with such registration; and the Holder will reimburse any
legal or other expenses, as incurred, where same are reasonably incurred by any
person intended to be indemnified pursuant to this Section 10(g), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the liability of each Holder under this Section
10(g) shall be limited to an amount equal to the public offering price of the
shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution
to joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant
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equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section
10 with respect to any request or requests made by the Holder after the date
which is five (5) years following the date of the consummation of the first sale
of securities pursuant to a registration statement filed by the Company under
the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section
10(i), the Company shall not be required to effect any registrations under the
1933 Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock
12
13
shares included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares of securities of every
other person subject to the foregoing restriction) until the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
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14
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to have been given
as provided above, whether by mail or by courier, as applicable, if transmitted
by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: August 19, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Xxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxx
---------------------
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15
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS WARRANT CANNOT
BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL
THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER
THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after 3:00 p.m. M.S.T., December 13, 2000
1. Basic Terms. This certifies that, for value received, Xxxx Xxxxxx.
(hereinafter the "Registered Owner") is entitled, subject to the terms and
conditions of this Warrant, until the expiration date of 3:00 p.m. M.S.T.,
December 13, 2000, to purchase up to and including One Hundred Five thousand
(105,000) shares of the Common Stock, par value $0.001 ("the Common Stock") (as
may be adjusted herein), of Chaparral Network Storage, Inc. (the "Corporation")
from the Corporation at the purchase price of one dollar ($1.00) a share, upon
delivery of this Warrant to the Corporation along with the Subscription Form
duly executed and payment of the aggregate purchase price (in cash or by
certified or bank cashier's check payable to the order of the Corporation) for
each share purchased, and as more fully set forth herein.
Registered Owner of Warrant: Xxxx Xxxxxx
Purchase Price: One dollar ($1.00) per share of common
stock
Expiration Date of Warrant: 3:00 p.m. M.S.T., December 13, 2000.
2. Corporation's Covenants as to Common Stock. Shares deliverable on
the exercise of this Warrant shall, at delivery, be fully paid and
non-assessable, free from taxes, liens, and charges with respect to their
purchase. The Corporation shall at all times reserve and hold available
sufficient shares of Common Stock to satisfy all conversion and purchase rights
of outstanding convertible securities, options and warrants.
3. Automatic Termination. In the event of (i) the closing of the
Corporation's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Corporation's securities is sold to
the public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Corporation in a merger, business
combination, or other form of business transaction, then the Corporation shall
give the Registered Owner of this Warrant at least fifteen (15) days written
notice of the proposed effective date and terms of such offering, transaction or
agreements, and if the Warrant has not
16
been exercised at least before the effective date of such offering, transaction
or agreements, then this Warrant and the rights hereunder shall be automatically
terminated.
4. Method of Exercise; Fractional Shares. The Registered Owner may
exercise from time to time, in whole or in part on or before the Expiration Date
above noted, the purchase rights evidenced hereby, provided, however, that
purchase rights are not exercisable with respect to a fraction of a share of
Common Stock. Such exercise shall be effected by:
(i) The surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto as Appendix I, to the Secretary
of the Corporation at its principal offices; and
(ii) The payment to the Corporation, in cash or by check payable
to the order of the Corporation, of an amount equal to the aggregate purchase
price for the number of shares designated for purchase in the completed
subscription form; and
(iii) Upon the request of the Corporation, the Registered Owner
shall also deliver to the Corporation an instrument, in form and substance
reasonably satisfactory to counsel for the Corporation, executed by the
Registered Owner certifying that the shares are being acquired for investment
purposes only and not with a view to their resale or distribution; and
In the event of a partial exercise of this Warrant, a new Warrant shall be
issued to the Registered Owner representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice. The Corporation shall not be
required to issue any fractional shares upon the exercise of the Registered
Owner's purchaser rights under this Warrant. In lieu of any fractional shares,
the Corporation shall pay cash equal to such fraction multiplied by the per
share market price of the Common Stock as of the date of exercise.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of shares so
purchased shall be issued in the name of the Registered Owner as soon as
practicable following receipt of the completed subscription form and payment for
the shares being purchase and in any event within ten (10) days thereafter.
6. Adjustment of Price and Shares Available for Purchase. The number of
shares available for purchase hereunder and the purchase price per share are
subject to adjustment from time to time as specified in this Warrant.
7. Limited Rights of Registered Owner. This Warrant does not entitle
the Registered Owner to any voting rights or other rights as a Stockholder of
the Corporation, or to any other rights whatsoever except the rights herein
expressed. No dividends are payable or will accrue on this Warrant or the shares
available for purchase hereunder until, and except to the extent that, this
Warrant is exercised.
8. Exchange for Other Denominations. This Warrant is exchangeable, on
its surrender by the Registered Owner to the Corporation, for new Warrants of
like tenor and date
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17
representing in the aggregate the right to purchase the number of shares
available for purchase hereunder in denominations designated by the Registered
Owner at the time of surrender.
9. Transfer.
(a) This Warrant, and any rights hereunder, may not be assigned or
transferred, except as provided herein and in accordance with and subject to the
provisions of (i) applicable state securities laws, and (ii) the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (such
Act and such rules and regulations being hereinafter collectively referred to as
the "Act"). Any purported transfer or assignment made other than in accordance
with this Section 9 shall be null and void and of no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred or
assigned only with the prior written consent of the Corporation, which shall be
granted only upon receipt by the Corporation of an opinion of counsel
satisfactory to the Corporation that (i) the transferee is a person to whom this
Warrant may be legally transferred without registration under the Act, and (ii)
such transfer will not violate any applicable law or governmental rule or
regulation, including, without limitation, any applicable federal or state
securities law. Prior to the transfer or assignment, the assignor or transferor
shall reimburse the Corporation for its reasonable expenses, including transfer
taxes and attorneys' fees, incurred in connection with the transfer or
assignment.
(c) Any assignment permitted hereunder shall be made by surrender of
this Warrant to the Corporation at its principal office with an assignment in a
form satisfactory to the Corporation duly executed and funds sufficient to pay
any transfer tax. In such event, the Corporation shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall be promptly canceled.
10. Recognition of Registered Owner. Prior to due presentment for
registration of transfer of this Warrant, the Corporation may treat the
Registered Owner as the person exclusively entitled to receive notices and
otherwise to exercise rights hereunder.
11. Effect of Stock Split, Etc. If the Corporation, by stock dividend,
split, reverse split, reclassification of shares, or otherwise, changes as a
whole the outstanding Common Stock into a different number or class of shares,
then:
(a) the number and class of shares so changed shall, for the
purposes of this Warrant, replace the shares outstanding immediately prior to
the change; and
(b) the Warrant purchase price in effect, and the number of shares
available for purchase under this Warrant, immediately prior to the date upon
which the change becomes effective, shall be proportionately adjusted (the price
to the nearest cent). Irrespective of any adjustment or change in the Warrant
purchase price or the number of shares purchasable under this or any other
Warrant of like tenor, the Warrants theretofore and thereafter issued may
continue to express the Warrant purchase price per share and the number of
shares available for purchase as the Warrant purchase price per share and the
number of shares available for purchase were expressed in the Warrants when
initially issued.
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18
12. Notice of Adjustment. On the happening of an event requiring an
adjustment of the Warrant purchase price or the shares available for purchase
hereunder, the Corporation shall forthwith give written notice to the registered
owner stating the adjusted Warrant purchase price and the adjusted number and
kind of securities or other property available for purchase hereunder resulting
from the event and setting forth in reasonable detail the method of calculation
and the facts upon which the calculation is based. The Board of Directors of the
Corporation, acting in good faith, shall determine the calculation.
13. Notice and Effect of Dissolution, Etc. In case a voluntary or
involuntary dissolution, liquidation, or winding up of the Corporation is at any
time proposed, the Corporation shall give at least a 30-day written notice to
the registered owner. Such notice shall contain: (a) the date on which the
transaction is to take place; (b) the record date (which shall be at least 30
days after the giving of the notice) as of which holders of Common Shares will
be entitled to receive distributions as a result of the transaction; (c) a brief
description of the transaction; (d) a brief description of the distributions to
be made to holders of Common Stock as a result of the transaction; and (e) an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall terminate.
14. Method of Giving Notice; Extent Required. Notices shall be given by
first class mail, postage prepaid, addressed to the Registered Owner at the
address of the owner appearing in the records of the Corporation. No notice to
warrant holders is required except as specified herein.
15. "Market Stand-off" Agreement. Subject to the terms and conditions
of paragraph 3 hereof, the Registered Owner agrees, so long as the Registered
Owner holds at least one percent (1%) of the Corporation's outstanding voting
equity securities, in connection with the Corporation's initial underwritten
public offering of the Corporation's securities that, upon request of the
Corporation or the underwriters managing any underwritten offering of the
company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Common Stock of the
Corporation without the prior written consent of the Corporation or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the closing date of such registration as may be
requested by the underwriters; provided, however, that such covenants shall
apply on if (i) all of the officers and directors of the Corporation who own
stock of the Corporation and (ii) each shareholder owning more than two percent
(2%) of the Corporation's shares also agree to such restrictions on any shares
not being registered in such offering. In order to enforce the foregoing
covenant, the Corporation may impose stop-transfer instructions with respect to
the shares of the Registered Owner (and the shares of securities of every other
person subject to the foregoing restriction) until the end of such period.
16. Governing Law. This Warrant shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado applicable to
contracts entered into and wholly to be performed in Colorado by Colorado
residents.
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19
IN WITNESS WHEREOF, the Corporation has caused the Warrant to be
executed by a duly authorized Officer.
Dated December 13, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ XXXXXXX X. XXXXXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
-------------------------------
Title: Vice President Finance
------------------------------
Acknowledged and Agreed:
By: /s/ Xxxxxxx X. Childs
-----------------------------
Name: Xxxx Xxxxxx
---------------------------
Title:
--------------------------
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20
NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after August 12, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Xxxxxxx X. Childs, (the "Holder") or its registered
assigns is entitled to purchase from Chaparral Network Storage, Inc., a Delaware
corporation (the "Company") up to twenty five thousand (25,000) fully paid and
nonassessable shares of Common Stock, $0.001 par value, of the Company (as
adjusted pursuant to Section 7 hereof, the "Shares") at the purchase price per
share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with
1
21
the 1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.50 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for
a term beginning on August 13, 1999, (the "Commencement Date") and ending on
August 12, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto as Appendix I, to
the Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X= the number of Shares to be issued to the Holder.
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22
Y= the number of Shares purchasable under this Warrant (at the date of
such exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(c) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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23
Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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24
(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
5
25
expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from the Holder a written request that the Company file a
registration statement under the 1933 Act with respect to shares of Registrable
Securities having an expected aggregate offering price of at least One Million
Dollars ($1,000,000), the Company will, subject to the limitations of Section
9(a)(ii), use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the
closing date of the Company's first registered public offering of its stock
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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26
(D) After the Company has effected one (1)
such registration pursuant to a Holder's demand under this Section 10(a)(i),
which registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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27
(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing
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28
underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. In such instance, Company shall use its best efforts to cure any such
statement or omission so as to render such statement or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as
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29
defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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30
agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution
to joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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31
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section
10 with respect to any request or requests made by the Holder after the date
which is five (5) years following the date of the consummation of the first sale
of securities pursuant to a registration statement filed by the Company under
the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section
10(i), the Company shall not be required to effect any registrations under the
1933 Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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33
have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: August 13, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Xxxxxxx X. Childs
/s/ Xxxxxxx X. Childs
---------------------
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NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after August 18, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Xxxxxxx X. Xxxxx, (the "Holder") or its registered
assigns is entitled to purchase from Chaparral Network Storage, Inc., a Delaware
corporation (the "Company") up to twenty thousand (20,000) fully paid and
nonassessable shares of Common Stock, $0.001 par value, of the Company (as
adjusted pursuant to Section 7 hereof, the "Shares") at the purchase price per
share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with
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35
the 1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.125 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder
fora term beginning on August 19, 1999, (the "Commencement Date") and ending on
August 18, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a duly
executed copy of the form of subscription attached hereto as Appendix I, to the
Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X= the number of Shares to be issued to the Holder.
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36
Y= the number of Shares purchasable under this Warrant (at the date of
such exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(d) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
purchase price therefor shall be subject to adjustment from time to time as
follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company shall
receive from the Holder a written request that the Company file a registration
statement under the 1933 Act with respect to shares of Registrable Securities
having an expected aggregate offering price of at least One Million Dollars
($1,000,000), the Company will, subject to the limitations of Section 9(a)(ii),
use its best efforts to effect such registration under the 1933 Act (including,
without limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act;
(B) Prior to the six (6) months after the closing
date of the Company's first registered public offering of its stock (other than
a registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan or a
SEC Rule 145 transaction);
(C) During the period starting with the date sixty
(60)days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the closing date of, any initial
registration statement pertaining to securities of the Company (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction); provided, however, that the Company is acting in good
faith and using all reasonable efforts to cause such initial registration
statement to become effective;
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(D) After the Company has effected one (1) such
registration pursuant to a Holder's demand under this Section 10(a)(i), which
registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration
pursuant to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back Registration.
The right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this
Section 9 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holder, keep such registration statement effective for up to one hundred
twenty (120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement with
terms generally satisfactory to the managing underwriter of such offering. The
Holder shall also enter into and perform its obligations under such an
agreement.
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(vi) Notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. In such instance, Company shall use its best
efforts to cure any such statement or omission so as to render such statement or
omission not misleading.
(d) Furnish Information. In connection with any action pursuant
to this Section 10, the Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of their Registrable Securities. In that connection, the Holder
shall be required to represent to the Company that all such information which is
given is both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities in the registration, all stock transfer taxes and all fees and
disbursements of any additional special counsel (other than the special counsel
provided for in Section 10(e)(i) above) retained in connection with each such
registration by the Holder.
(f) Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with (i) any registration,
qualification or compliance pursuant to Section 10(a), and (ii) no more than
three (3) registrations pursuant to Section 10(b). All Selling Expenses shall be
borne by the Holder.
(g) Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder, the officers, directors and partners of
the Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter (within
the meaning of the 0000 Xxx) for the Company, any person who controls such
underwriter, and any other security holder in such registration statement or any
of its partners, directors or officers or any person who controls such security
holder, against any losses, claims, damages or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the 1933 Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable
contribution to joint liability under the 1933 Act in any case in which either
(i) any indemnified party makes a claim under this Section 10(g) or any
controlling person of such indemnified party makes such a claim but is
judicially determined (by entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10(g) provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of any such person seeking indemnity under the terms of this Section 10(g);
then, and in each such case, the Company and such person will contribute to the
aggregate losses, claims, damages, or liabilities to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and
agrees that (i) the Company and certain investors have entered into an Investor
Rights Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii)
the Holder may include his securities in a demand registration under the
Investor Rights Agreement only to the extent that the inclusion of his
securities will not reduce the amount of securities to be registered for parties
to the Investor Rights Agreement and (iii) the Holder shall not make a demand
registration which could result in such registration statement being declared
effective prior six months after the effective date of the Company's initial
public offering of securities pursuant to a registration filed under the 1933
Act or within one hundred twenty (120) days of the effective date of any demand
registration pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to
Section 10 with respect to any request or requests made by the Holder after the
date which is five (5) years following the date of the consummation of the first
sale of securities pursuant to a registration statement filed by the Company
under the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this
Section 10(i), the Company shall not be required to effect any registrations
under the 1933 Act or under any state securities laws on behalf of the Holder
if, in the opinion of counsel to the Company, the offering or transfer by such
Holder in the manner proposed (including, without limitation, the number of
shares proposed to be offered or transferred, the time of sale, and the method
of offering or transfer) is exempt from the registration requirements of the
1933 Act and the securities laws of applicable states and the Company consents
to such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: August 19, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Xxxxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxxx
---------------------
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NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL TECHNOLOGIES, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL TECHNOLOGIES, INC.
Void after December 15, 2003
This certifies that, subject to the terms and conditions set forth
herein, for value received, Harvest Storage Technology Group LLC., a Delaware
corporation, (the "Holder") or its registered assigns is entitled to purchase
from Chaparral Technologies, Inc., a Delaware corporation (the "Company") up to
one hundred eleven thousand, one hundred eleven (111,111) fully paid and
nonassessable shares of Common Stock, $0.001 par value, of the Company (as
adjusted pursuant to Section 7 hereof, the "Shares") at the purchase price per
share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Technologies, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Harvest Storage Technology Group LLC., a
Delaware corporation.
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(g) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act, and the
declaration or ordering of the effectiveness of such registration statement or
document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.001 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for
a term beginning on December 15, 1998, (the "Commencement Date") and ending on
December 15, 2003, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto as Appendix I, to
the Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
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Where X= the number of Shares to be issued to the Holder.
Y= the number of Shares purchasable under this Warrant (at the date of
such exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter market
or the closing price quoted on any exchange on which the Common Stock is
listed, whichever is applicable, as published in the Western Edition of
The Wall Street Journal for the five (5) trading days prior to the date of
determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair market
value of the Common Stock shall be determined in good faith by the
Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder. The
cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(c) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of
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this Warrant for the full number of Shares specified herein and the conversion
of the Shares into Common Stock. The Company further covenants that such Shares,
when issued pursuant to the exercise of this Warrant, will, upon issuance, be
duly and validly issued, fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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52
(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer
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or assignment, the assignor or transferor shall reimburse the Company for its
reasonable expenses, including transfer taxes and attorneys' fees, incurred in
connection with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from the Holder a written request that the Company file a
registration statement under the 1933 Act with respect to shares of Registrable
Securities having an expected aggregate offering price of at least One Million
Dollars ($1,000,000), the Company will, subject to the limitations of Section
9(a)(ii), use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the
closing date of the Company's first registered public offering of its stock
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good
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54
faith and using all reasonable efforts to cause such initial registration
statement to become effective;
(D) After the Company has effected one (1)
such registration pursuant to a Holder's demand under this Section 10(a)(i),
which registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii),
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use its best efforts to cause to be registered under the 1933 Act all of the
Registrable Securities that the Holder has requested to be registered. The
Company shall be required to effect not more than three (3) such registrations
of Registrable Securities pursuant to the request of the Holder under this
Section 10(b).
(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
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expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing underwriter of such offering. The Holder
shall also enter into and perform its obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. In such instance, Company shall use its best
efforts to cure any such statement or omission so as to render such statement or
omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
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57
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as defined in the 0000 Xxx) for the Holder and each
person, if any, who controls the Holder or underwriter within the meaning of the
1933 Act or the 1934 Act, against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the 1933 Act, the 1934
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto; (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any state securities
law; and the Company will reimburse the Holder, officer, director or partner,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
Company's indemnity contained in this Section 10(g) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished in writing and expressly stated
for use in connection with such registration by the Holder, or the Holder's
officers, directors or partners, underwriter, or controlling person. The Company
shall not be required to indemnify any person against any liability arising (i)
from any untrue or misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final prospectus or (ii) out
of the failure of any person to deliver a prospectus as required by the 1993
Act. The indemnity provided for in this Section 10(g) shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such
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58
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by the Holder expressly stated in a writing for
use in connection with such registration; and the Holder will reimburse any
legal or other expenses, as incurred, where same are reasonably incurred by any
person intended to be indemnified pursuant to this Section 10(g), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the liability of each Holder under this Section
10(g) shall be limited to an amount equal to the public offering price of the
shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution
to joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant
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59
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November 25, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section
10 with respect to any request or requests made by the Holder after the date
which is five (5) years following the date of the consummation of the first sale
of securities pursuant to a registration statement filed by the Company under
the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section
10(i), the Company shall not be required to effect any registrations under the
1933 Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock
12
60
shares included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares of securities of every
other person subject to the foregoing restriction) until the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
13
61
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to have been given
as provided above, whether by mail or by courier, as applicable, if transmitted
by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: December 15, 1998.
CHAPARRAL TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President, Finance
Acknowledged and Agreed:
Harvest Storage Technology Group LLC.
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx Xxxxxx
Title: Manager
14
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NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS WARRANT
CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, UNLESS
AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION IS NOT THEN
REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE 300,000 SHARES OF COMMON STOCK OF
CHAPARRAL NETWORK STORAGE, INC.
VOID AFTER MAY 31, 2001
This Warrant (the "Warrant") certifies that, subject to the terms and
conditions set forth herein, for value received, ADAPTEC, INC., a Delaware
corporation (the "Holder"), is entitled to purchase from CHAPARRAL NETWORK
STORAGE, INC., a Delaware corporation (the "Company"), up to three hundred
thousand (300,000) fully paid and nonassessable shares of Common Stock, $0.001
par value, of the Company at the purchase price per share specified in Section
2 below, with the Common Stock issuable upon exercise of this Warrant referred
to herein as the "Shares".
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
(b) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of common
stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(c) "Company" means Chaparral Network Storage, Inc., a Delaware
corporation and any corporation which shall succeed to or assume the
obligations of the Company under this Warrant.
(d) "Fair Market Value" of a share of Common Stock as of a
particular date means (a) if traded on an exchange or the over-the-counter
market, quoted on the Nasdaq National Market or reported by the National
Quotation Bureau, then the average of the reported closing or bid price for the
fifteen (15) trading days immediately preceding the date on which "Fair Market
Value" is being determined, appropriately adjusted to reflect any stock split,
combination, dividend or distribution, if any, occurring after such date, (b)
if conversion or exercise is simultaneous with an
63
underwritten public offering registered under the 1933 Act, the public offering
price (before deducting commissions, discounts or expenses) per share sold in
such offer, and (c) otherwise, the price, not less than book value, determined
in good faith and in such reasonable manner as prescribed by a majority of the
disinterested members of the Company"s Board of Directors who are not Company
officers or employees.
(e) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976 and the rules and regulations thereunder.
(f) "Holder" means Adaptec, Inc., a Delaware corporation, and its
permitted successors and assigns .
(g) "SEC" means the Securities and Exchange Commission.
(h) "Subscription Notice" means a Subscription Notice substantially
in the form of Appendix I attached hereto, for execution upon exercise of the
purchase right represented by this Warrant.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $20.00 per Share, subject to adjustment pursuant to Section 7
hereof (such price, as adjusted from time to time, is herein referred ---------
to as the "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder
for a term (the "Exercise Period") beginning at 8:00 a.m. Mountain Standard
Time on December 1, 2000 (the "Commencement Date") and ending at 5:00 p.m.
Mountain Standard Time on May 31, 2001 (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise the purchase rights evidenced hereby, in
whole or in part, during the Exercise Period. Such exercise shall be effected
by:
(i) the surrender of the Warrant, together with a duly
executed copy of the Subscription Notice, to the Secretary of the
Company at its principal office; and
(ii) the payment to the Company, by wire transfer of
immediately available funds to an account designated by the Company
at least two (2) days prior to the Commencement Date of an
aggregate amount equal to the number of Shares designated for
purchase in the completed Subscription Notice multiplied by the
Warrant Price.
(b) If the Holder believes that the exercise of this Warrant will
necessitate a filing under the HSR Act, the Holder shall give the Company at
least thirty (30) but not more than ninety
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(90) days written notice of Holder"s intent to exercise this Warrant. As
promptly as practicable after the giving of such notice, the Company and the
Holder shall make all filings required by the HSR Act.
(c) Upon the request of the Company, the Holder shall also deliver to
the Company an instrument, in form and substance reasonably satisfactory to
counsel for the Company, executed by the Holder certifying that the Shares are
being acquired for investment purposes only and not with a view to their resale
or distribution.
(d) This Warrant and all rights of the Holder to purchase Shares
hereunder shall terminate and become void at the Expiration Date.
(e) Net Exercise Election. The Holder may elect to convert all or a
portion of this Warrant, without the payment by the Holder of any additional
consideration, by the surrender of this Warrant or such portion of this Warrant
to the Company, with the net exercise election selected in the Notice of
Exercise attached hereto as Appendix II duly executed by the Holder, into up to
the number of Shares that is obtained under the following formula:
X = Y (A-B)
--------
A
where X = the number of shares to be issued to the Holder.
Y = the number of Shares as to which this Warrant is being
exercised.
A = the fair market value of one Share, as determined in good
faith by the Company's Board of Directors, as at the time
the net exercise election is made.
B = the Warrant Price.
The Company will promptly respond in writing to an inquiry by the
Holder as to the then current fair market value of one Share.
For purposes of the above calculation, fair market value of one Share
shall be determined by the Company's Board of Directors in good faith;
provided, however, that where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per share
shall be the average of the closing bid and asked prices of the Common Stock
quoted in the Over-The-Counter Market Summary or the last reported sale price
of the Common Stock or the closing price quoted on the Nasdaq National Market
or on any exchange on which the Common Stock is listed, whichever is
applicable, as published in the Western Edition of The Wall Street Journal for
the three (3) trading days prior to the date of determination of fair market
value.
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5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable, and
in any event within ten (10) days, after receipt by the Company of the
completed Subscription Notice and payment for the Shares being purchased. The
Company shall not be required to issue any fractional shares upon the exercise
of the Holder"s purchase rights under this Warrant. In lieu of any fractional
shares, the Company shall pay cash equal to such fraction multiplied by the per
share Fair Market Value of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Common Stock, free
from all preemptive rights with respect thereto, as will be sufficient to
permit the exercise of this Warrant for the purchase of the full number of
Shares specified herein. The Company further covenants that such Shares, when
issued pursuant to the exercise of this Warrant, will, upon issuance, be duly
and validly issued, fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the Warrant
Price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits, Stock Dividends and Combinations. If the Company
shall at any time subdivide or combine its outstanding shares of the Common
Stock, or shall make or issue a dividend or other distribution payable in
additional shares of Common Stock, this Warrant shall, after that subdivision,
combination or dividend, evidence the right to purchase the number of shares of
Common Stock that would have been issuable as a result of that change with
respect to the shares of the Common Stock which were purchasable under this
Warrant immediately before that subdivision or combination. If the Company
shall at any time subdivide the outstanding shares of Common Stock, or shall
make or issue a dividend or other distribution payable in additional shares of
Common Stock, the Warrant Price then in effect immediately before that
subdivision or dividend shall be proportionately decreased, and, if the Company
shall at any time combine the outstanding shares of Common Stock, the Warrant
Price then in effect immediately before that combination shall be
proportionately increased. Any adjustment under this Section 7(a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common
Stock which the Holder would have become entitled to purchase but for such
change, a number of shares of such other series or class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to purchase by the Holder on exercise of this Warrant immediately before that
change.
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(c) Reorganization. If at any time there shall be a capital
reorganization of the Company (other than a combination, reclassification,
exchange, or subdivision of shares provided for elsewhere in this Warrant),
then, as a part of such capital reorganization, lawful provision shall be made
so that the Holder of this Warrant shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified in this Warrant and upon
payment of the Warrant Price then in effect, the number of shares of stock or
other securities or property of the Company or its successor to which a holder
of the Company"s Common Stock deliverable upon exercise of this Warrant would
have been entitled in such capital reorganization if this Warrant had been
exercised immediately before that capital reorganization.
(d) Adjustments for Dividends and Other Distributions. If the
Company at any time or from time to time makes or fixes a record date for the
determination of holders of Common Stock entitled to received any distribution
(excluding any repurchases of securities by the Company not made on a pro rata
basis from all holders of any class of the Company securities) payable in
property other than cash or in securities of the Company, then and in each such
event the Holder of this Warrant shall receive at the time of the exercise of
this Warrant, the amount of property or the number of securities of the Company
that the Holder would have received had it exercised this Warrant on such
record date, in addition to the Shares.
(e) Notice of Adjustments. The Company shall give notice of each
adjustment or readjustment of the number of shares of the Common Stock or other
securities issuable upon exercise of this Warrant and the Warrant Price to the
registered Holder of this Warrant at that Holder"s address as shown on the
Company"s books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(f) No Change Necessary. The form of this Warrant need not be changed
because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment, provided that an appropriate notation to this effect
is made on such Warrant.
8. Merger, Consolidation or Sale of Assets.
(a) If the Company consolidates with or merges into another entity
and is not the survivor, or sells or conveys substantially all of its property,
and in connection therewith, shares of stock, other securities, property, or
cash (collectively, "Merger Consideration") are issuable or deliverable in
exchange for shares of the Company"s capital stock, then the Company shall give
the Holder at least thirty (30) days prior written notice of the consummation
of such transaction and the Holder may thereafter, at its option, (i) exercise
the Warrant, regardless of whether this Warrant is exercisable at the time of
such action, or (ii) require the Company or its successor or purchaser to
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67
enter into an agreement with the Holder to the effect that the Holder shall
have the right thereafter, upon payment of the Warrant Price in effect
immediately prior to such action, to purchase upon exercise of this Warrant the
Merger Consideration (subject to adjustment as provided in this Warrant) that
the Holder would have received had the Holder exercised this Warrant in its
entirety immediately prior to such merger, sale or conveyance, regardless of
whether this Warrant is exercisable at the time of such action.
(b) If the Company receives notice that a purchase, tender or
exchange offer has been made to the holders of more than 50% of the outstanding
Common Stock (on an as converted basis), the Company shall give the Holder
reasonable notice thereof, and the Holder shall be entitled to exercise this
Warrant immediately, regardless of whether this Warrant is exercisable at the
time of such offer and without giving the Company the notice required by
Section 4(b).
9. Notice of Certain Events. If (a) the Company authorizes the
issuance to all holders of any class of its capital stock rights or warrants to
subscribe for or purchase shares of its capital stock, or any other
subscription rights or warrants; (b) the Company authorizes the distribution to
all holders of any class of its capital stock evidences of indebtedness or
assets; (c) there is any capital reorganization or reclassification of the
Shares or the Company"s Common Stock, other than a subdivision or combination
of the outstanding Common Stock and other than a change in par value of the
Common Stock; (d) the Board of Directors of the Company approves any
liquidation or merger to which the Company is a party and for which approval of
the Company"s stockholders is required, other than a consolidation or merger in
which the Company is the surviving corporation and that does not result in any
reclassification or change of the shares of Common Stock issuable upon the
exercise of this Warrant; (e) the Board of Directors of the Company approves
the conveyance or transfer of the all or substantially all of the Company"s
properties and assets; or (f) the Board of Directors of the Company approves
the Company"s voluntary or involuntary dissolution, liquidation or winding-up
(each of the foregoing being a "Notice Event"); then the Company shall cause to
be mailed by certified mail to the Holder, at least thirty (30) days prior to
the applicable record or effective date hereinafter specified, a notice stating
the dates as of which (x) the holders of capital stock of record to be entitled
to receive any such rights, warrants or distributions or to be entitled to vote
on such Notice Event are to be determined and (y) such Notice Event is expected
to become effective. The Holder of record of this Warrant shall be entitled to
exercise of this Warrant upon the consummation of such Notice Event, regardless
of whether this Warrant is exercisable at the time of such action.
10. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be sold,
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
1933 Act. Any purported transfer or assignment made other than in accordance
with this Section 10 shall be null and void and of no force and effect.
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68
(b) This Warrant, and any rights hereunder, may be sold,
transferred or assigned only to a direct or indirect subsidiary or affiliate of
the Holder or an entity of which the Holder is a direct or indirect subsidiary
or affiliate, or any 501(c)(3) charitable organization with which Holder is
affiliated, which sale, transfer or assignment shall be effective upon receipt
by the Company of notice thereof. Prior to the transfer or assignment, the
assignor or transferor shall reimburse the Company for its reasonable expenses,
including transfer taxes and reasonable attorneys" fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by surrender
of this Warrant to the Company at its principal office with an assignment duly
executed and funds sufficient to pay any transfer tax. In such event, the
Company shall, without charge, execute and deliver a new Warrant in the form
hereof in the name of the assignee named in such instrument of assignment and
this Warrant shall be promptly canceled.
11. Miscellaneous Provisions.
(a) Replacement. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of an indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu of this Warrant a new
Warrant of like tenor.
(b) No Rights as Stockholder. Prior to the exercise of this
Warrant, the Holder shall not be entitled to vote or receive dividends or be
considered a stockholder of the Company for any purpose, nor shall anything in
this Warrant be construed to confer on the Holder any rights of a shareholder
of the Company or any right to vote, give or withhold consent to any corporate
action, to receive notice of meetings of stockholders (except as set forth in
this Warrant), to receive dividends or subscription rights or otherwise.
(c) Governing Law. This Warrant shall be governed by and construed
and enforced in accordance with the laws of the State of California applicable
to contracts entered into and wholly to be performed in California by
California residents.
(d) Notices. All notices hereunder shall be in writing and shall be
(i) personally delivered, (ii) transmitted by mail, postage prepaid, registered
or certified, return receipt requested, (iii) transmitted by an overnight
courier of recognized reputation or (iv) transmitted by telecopier (with
confirmation by air mail or courier), to the respective addresses set forth in
writing by the Company and the Holder. Except as otherwise specified herein,
communications shall be deemed to have been duly given on (A) the date of
receipt or refusal of delivery if delivered personally, (B) the date five (5)
days after posting if transmitted by mail, (C) the date three (3) days after
delivery to the courier if sent by recognized courier service, or (D) the date
on which written
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69
confirmation would be deemed to have been given as provided above, whether by
mail or by courier, as applicable, if transmitted by telecopier, whichever
shall first occur.
(e) Amendments. No amendment or modification of any provision of
this Warrant shall be effective unless the same shall be in writing and signed
by the parties hereto.
(f) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, intentionally avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but it will at all times in good faith assist in the carrying out of
all of the provisions of this Warrant 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.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: March 1, 2000.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------------------
Title: President and Chief Operating Officer
-------------------------------------
Acknowledged and Agreed:
ADAPTEC, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------------------
Name: Xxxxx Xxxxxxxx
--------------------------
Title: Vice President, Treasurer
-------------------------
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NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL TECHNOLOGIES, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL TECHNOLOGIES, INC.
Void after February 8, 2004
This certifies that, subject to the terms and conditions set forth herein,
for value received, Sentinel Consulting LLC., a Delaware corporation, (the
"Holder") or its registered assigns is entitled to purchase from Chaparral
Technologies, Inc., a Delaware corporation (the "Company") up to one hundred
fifty thousand (150,000) fully paid and nonassessable shares of Common Stock,
$0.001 par value, of the Company (as adjusted pursuant to Section 7 hereof, the
"Shares") at the purchase price per share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless the
context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the Company,
means all shares, now or hereafter authorized, of the class of Common Stock,
$0.001 par value, of the Company currently authorized and shares of any other
class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Technologies, Inc. a Delaware corporation
and any corporation which shall succeed to or assume the obligations of the
Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(e) "Convertible equity securities" or "equity securities" shall mean
any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware corporation.
(g) The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of the effectiveness of such registration statement or document by the
SEC.
1
71
(h) The term "Registrable Securities" means: (i) the Common Stock or
other equity or convertible equity securities of the Company issued or issuable
upon exercise of this Warrant; and (ii) any Common Stock of the Company issued
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.25 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for a
term beginning on February 8. 1999, (the "Commencement Date") and ending on
February 8, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in part on
or before the Expiration Date, the purchase rights evidenced hereby. Such
exercise shall be effected by:
(i) the surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto as Appendix I, to the Secretary
of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check payable to
the order of the Company, of an amount equal to the aggregate purchase price for
the number of Shares designated for purchase in the completed subscription form.
(b) In lieu of exercising this Warrant pursuant to Section 4(a), the
Holder may elect to receive shares equal to the value of this Warrant (or any
portion thereof remaining unexercised) by surrender of this Warrant at the
principal office of the Company together with the Subscription Form, in which
event the Company shall issue to the Holder a number of Shares computed using
the following formula:
X = Y (A-B)
--------
A
Where X= the number of Shares to be issued to the Holder.
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Y=the number of Shares purchasable under this Warrant (at the date of such
exercise).
A=the fair market value of one Share (at the date of such exercise).
B=the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter market
or the closing price quoted on any exchange on which the Common Stock is
listed, whichever is applicable, as published in the Western Edition of The
Wall Street Journal for the five (5) trading days prior to the date of
determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair market
value of the Common Stock shall be determined in good faith by the Company's
Board of Directors. If the Holder disagrees with the determination by the
Board of Directors of the fair market value of the Common Stock then such
fair market value shall be determined by an independent appraiser selected
jointly by the Company and the Holder. The cost of such appraisal shall be
paid equally by the Company and the Holder.
(c) Upon the request of the Company, the Holder shall also deliver to
the Company an instrument, in form and substance reasonably satisfactory to
counsel for the Company, executed by the Holder certifying that the Shares are
being acquired for investment purposes only and not with a view to their resale
or distribution.
(c) In the event of a partial exercise of this Warrant, a new Warrant
shall be issued to the Holder representing the balance of the Shares purchasable
under this Warrant, such new Warrant to be issued within ten (10) days after
delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all times
keep available such number of authorized shares of its Series A Preferred Stock
and Common Stock, free from all preemptive rights with respect thereto, as will
be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and kind
of securities purchasable upon exercise of this Warrant and the purchase price
therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any time
subdivide or combine its outstanding shares of the Common Stock, this Warrant
shall, after that subdivision or combination, evidence the right to purchase the
number of shares of Common Stock that would have been issuable as a result of
that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets. If at
any time there shall be a capital reorganization of the Company (other than a
combination, reclassification, exchange, or subdivision of shares provided for
elsewhere in this Warrant) or merger or consolidation of the Company with or
into another corporation, or the sale of the Company's properties and assets as,
or substantially as, an entirety to any other person, then, as a part of such
capital reorganization, merger, consolidation or sale, lawful provision shall be
made so that the Holder of this Warrant shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified in this Warrant and
upon payment of the Warrant Price then in effect, the number of shares of stock
or other securities or property of the Company, or of the successor corporation
resulting from such merger or consolidation, to which a holder of the Company's
Common Stock deliverable upon exercise of this Warrant would have been entitled
in such capital reorganization, merger, consolidation or sale if this Warrant
had been exercised immediately before that capital reorganization, merger,
consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of each
adjustment or readjustment of the number of shares of the Common Stock or other
securities issuable upon exercise of this Warrant and the Warrant Price to the
registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be changed
because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the Company's
registration statement on a Form S-1 (or any other form equivalent thereto)
pursuant to which any class of the Company's securities is sold to the public in
a public offering registered under the Securities Act of 1933, as amended; or
(ii) the proposed sale of all or substantially all the capital stock, or
substantially all the assets, of the Company in a merger, business combination,
or other form of business transaction with or into a third party in which the
Company's stockholders do not own at least a majority of the outstanding voting
securities of the surviving corporation or business entity after such
transaction (based solely on such Company stockholders' holdings of the Company
prior to the transaction), then the Company shall give the Holder of this
Warrant at least fifteen (15) days written notice of the proposed effective date
and terms of such offering, transaction or agreements, and if the Warrant has
not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be assigned or
transferred, except as provided herein and in accordance with and subject to the
provisions of (i) applicable state securities laws, and (ii) the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (such
Act and such rules and regulations being hereinafter collectively referred to as
the "Act"). Any purported transfer or assignment made other than in accordance
with this Section 9 shall be null and void and of no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred or
assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable expenses, including transfer taxes and attorneys'
fees, incurred in connection with the transfer or assignment.
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(c) Any assignment permitted hereunder shall be made by surrender of
this Warrant to the Company at its principal office with an assignment duly
executed and funds sufficient to pay any transfer tax. In such event, the
Company shall, without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this Warrant shall be
promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company shall receive
from the Holder a written request that the Company file a registration statement
under the 1933 Act with respect to shares of Registrable Securities having an
expected aggregate offering price of at least One Million Dollars ($1,000,000),
the Company will, subject to the limitations of Section 9(a)(ii), use its best
efforts to effect such registration under the 1933 Act (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the 1933 Act and any other governmental requirements or regulations) as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Registrable Securities as are specified in such
request; provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 10(a)(i):
(A) In any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the 1933 Act;
(B) Prior to the six (6) months after the closing date of the
Company's first registered public offering of its stock (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction);
(C) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date six
(6) months immediately following the closing date of, any initial registration
statement pertaining to securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction); provided, however, that the Company is acting in good faith and
using all reasonable efforts to cause such initial registration statement to
become effective;
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(D) After the Company has effected one (1) such registration
pursuant to a Holder's demand under this Section 10(a)(i), which registration
has been declared effective; or
(E) If the Company shall furnish to Holder a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company and
its shareholders for a registration statement to be filed at such time, then the
Company's obligation to use its best efforts to register, qualify or comply
under this Section 10(a)(i) shall be deferred for a period not to exceed one
hundred twenty (120) days from the date of receipt of written request from the
Holder; provided, however, that the Company may not make such certification more
than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant to
Section 10(a)(i) is for a registered public offering involving an underwriting,
the Company shall so advise the Holder and the right of the Holder to
registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holder) any
of its securities under the 1933 Act in connection with the public offering of
such securities solely for cash (other than a registration (i) on Form S-8 or
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, or (ii) with respect to an employee benefit plan, or
(iii) solely in connection with a Rule 145 transaction under the 1933 Act), the
Company shall, each such time, promptly give the Holder written notice of such
registration together with a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under applicable state securities
laws. Upon the written request of the Holder given within twenty (20) business
days after delivery of such written notice by the Company, the Company shall,
subject to the provisions of Section 10(b)(ii), use its best efforts to cause to
be registered under the 1933 Act all of the Registrable Securities that the
Holder has requested to be registered. The Company shall be required to effect
not more than three (3) such registrations of Registrable Securities pursuant to
the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holder,
keep such registration statement effective for up to one hundred twenty (120)
days.
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under the securities laws of such
jurisdictions as shall be reasonably appropriate for the distribution of the
securities covered by the registration statement; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such jurisdiction, and further provided that (anything in this Agreement to
the contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of the securities in that
jurisdiction be borne by selling shareholders, then such expenses shall be
payable by the Holder, to the extent required by such jurisdiction if the Holder
does elect to withdraw from the registration after notice of such requirement.
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(v) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement with terms generally
satisfactory to the managing underwriter of such offering. The Holder shall also
enter into and perform its obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. In such instance, Company shall use its best efforts to cure any such
statement or omission so as to render such statement or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred by
the Company in complying with Section 10 hereof, including, without limitation,
all registration, filing and qualification fees, underwriters' expense
allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of the Registrable Securities in the
registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
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(i) To the extent permitted by law, the Company will indemnify and
hold harmless the Holder, the officers, directors and partners of the Holder,
any underwriter (as defined in the 0000 Xxx) for the Holder and each person, if
any, who controls the Holder or underwriter within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto; (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any state securities
law; and the Company will reimburse the Holder, officer, director or partner,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
Company's indemnity contained in this Section 10(g) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished in writing and expressly stated
for use in connection with such registration by the Holder, or the Holder's
officers, directors or partners, underwriter, or controlling person. The Company
shall not be required to indemnify any person against any liability arising (i)
from any untrue or misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final prospectus or (ii) out
of the failure of any person to deliver a prospectus as required by the 1993
Act. The indemnity provided for in this Section 10(g) shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, any underwriter (within the meaning of the
0000 Xxx) for the Company, any person who controls such underwriter, and any
other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under this
Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution to
joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
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(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November 25, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section 10
with respect to any request or requests made by the Holder after the date which
is five (5) years following the date of the consummation of the first sale of
securities pursuant to a registration statement filed by the Company under the
1933 Act in connection with the initial firm commitment underwritten offering of
its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section 10(i),
the Company shall not be required to effect any registrations under the 1933 Act
or under any state securities laws on behalf of the Holder if, in the opinion of
counsel to the Company, the offering or transfer by such Holder in the manner
proposed (including, without limitation, the number of shares proposed to be
offered or transferred, the time of sale, and the method of offering or
transfer) is exempt from the registration requirements of the 1933 Act and the
securities laws of applicable states and the Company consents to such transfer,
if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares of securities of every
other person subject to the foregoing restriction) until the end of such period.
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12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu of this Warrant a new
Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and construed
and enforced in accordance with the laws of the State of California applicable
to contracts entered into and wholly to be performed in California by California
residents.
(e) Notices. All notices from the Company to the holder of this
Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to have been given
as provided above, whether by mail or by courier, as applicable, if transmitted
by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer.
Dated: February 8, 1999.
CHAPARRAL TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President, [ILLEGIBLE]
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL TECHNOLOGIES, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL TECHNOLOGIES, INC.
Void after March 31, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Technologies, Inc., a Delaware corporation (the "Company") up to fifty-five
thousand five hundred fifty six (55,556) fully paid and nonassessable shares of
Common Stock, $0.001 par value, of the Company (as adjusted pursuant to Section
7 hereof, the "Shares") at the purchase price per share specified in Section 2
below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Technologies, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with
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the 1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.36 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for
a term beginning on March 31. 1999, (the "Commencement Date") and ending on
March 31, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto as Appendix I, to
the Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X= the number of Shares to be issued to the Holder.
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Y= the number of Shares purchasable under this Warrant (at the date of
such exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(d) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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88
expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from the Holder a written request that the Company file a
registration statement under the 1933 Act with respect to shares of Registrable
Securities having an expected aggregate offering price of at least One Million
Dollars ($1,000,000), the Company will, subject to the limitations of Section
9(a)(ii), use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the
closing date of the Company's first registered public offering of its stock
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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89
(D) After the Company has effected one (1)
such registration pursuant to a Holder's demand under this Section 10(a)(i),
which registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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90
(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. In such instance, Company shall use its best efforts to cure any such
statement or omission so as to render such statement or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution
to joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November 25, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section
10 with respect to any request or requests made by the Holder after the date
which is five (5) years following the date of the consummation of the first sale
of securities pursuant to a registration statement filed by the Company under
the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section
10(i), the Company shall not be required to effect any registrations under the
1933 Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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96
have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: March 31, 1999.
CHAPARRAL TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President, Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
---------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS WARRANT CANNOT
BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A PREFERRED
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED,
UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION IS NOT THEN
REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after April 27, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Network Storage, Inc., a Delaware corporation (the "Company") up to fifty-two
thousand six hundred thirty two (52,632) fully paid and nonassessable shares of
Common Stock, $0.001 par value, of the Company (as adjusted pursuant to Section
7 hereof, the "Shares") at the purchase price per share specified in Section 2
below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act, and the
declaration or ordering of the effectiveness of such registration statement or
document by the SEC.
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(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.38 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for
a term beginning on April 28. 1999, (the "Commencement Date") and ending on
April 27, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto as Appendix I, to
the Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X= the number of Shares to be issued to the Holder.
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Y= the number of Shares purchasable under this Warrant (at the date of
such exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(c) In the event of a partial exercise of this Warrant, a
new Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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100
Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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102
expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from the Holder a written request that the Company file a
registration statement under the 1933 Act with respect to shares of Registrable
Securities having an expected aggregate offering price of at least One Million
Dollars ($1,000,000), the Company will, subject to the limitations of Section
9(a)(ii), use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the
closing date of the Company's first registered public offering of its stock
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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103
(D) After the Company has effected one (1)
such registration pursuant to a Holder's demand under this Section 10(a)(i),
which registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. In such instance, Company shall use its best efforts to cure any such
statement or omission so as to render such statement or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution
to joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section
10 with respect to any request or requests made by the Holder after the date
which is five (5) years following the date of the consummation of the first sale
of securities pursuant to a registration statement filed by the Company under
the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section
10(i), the Company shall not be required to effect any registrations under the
1933 Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares of securities of every
other person subject to the foregoing restriction) until the end of such period.
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12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to have been given
as provided above, whether by mail or by courier, as applicable, if transmitted
by telecopier, whichever shall first occur.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: April 28, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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NEITHER THIS WARRANT NOR THE SERIES A COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after May 27, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Network Storage, Inc., a Delaware corporation (the "Company") up to one hundred
four thousand two hundred fifty (104,250) fully paid and nonassessable shares of
Common Stock, $0.001 par value, of the Company (as adjusted pursuant to Section
7 hereof, the "Shares") at the purchase price per share specified in Section 2
below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the
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1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.40 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder
for a term beginning on May 28. 1999, (the "Commencement Date") and ending on
May 27, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a duly
executed copy of the form of subscription attached hereto as Appendix I, to the
Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X= the number of Shares to be issued to the Holder.
Y= the number of Shares purchasable under this Warrant (at the date of such
exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
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For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(c) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
purchase price therefor shall be subject to adjustment from time to time as
follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be assigned
or transferred, except as provided herein and in accordance with and subject to
the provisions of (i) applicable state securities laws, and (ii) the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(such Act and such rules and regulations being hereinafter collectively referred
to as the "Act"). Any purported transfer or assignment made other than in
accordance with this Section 9 shall be null and void and of no force and
effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company shall
receive from the Holder a written request that the Company file a registration
statement under the 1933 Act with respect to shares of Registrable Securities
having an expected aggregate offering price of at least One Million Dollars
($1,000,000), the Company will, subject to the limitations of Section 9(a)(ii),
use its best efforts to effect such registration under the 1933 Act (including,
without limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act;
(B) Prior to the six (6) months after the closing
date of the Company's first registered public offering of its stock (other than
a registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan or a
SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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(D) After the Company has effected one (1) such
registration pursuant to a Holder's demand under this Section 10(a)(i), which
registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration
pursuant to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back
Registration. The right of the Holder to registration pursuant to Section
10(b)(i) shall be conditioned upon the Holder's participation in such
underwriting and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent provided herein. The Holder shall (together with the
Company and any other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by the Company. Notwithstanding any other
provision of Section 10(b)(i) and this Section 10(b)(ii), if the underwriter
determines that market factors require a limitation of the number of shares to
be underwritten, the underwriter may (subject to the allocation priority set
forth below) exclude some or all Registrable Securities from such registration
and underwriting.
(c) Obligations of the Company. Whenever required under this
Section 9 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holder, keep such registration statement effective for up to one hundred
twenty (120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement with
terms generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. In such instance, Company shall use its best
efforts to cure any such statement or omission so as to render such statement or
omission not misleading.
(d) Furnish Information. In connection with any action pursuant
to this Section 10, the Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of their Registrable Securities. In that connection, the Holder
shall be required to represent to the Company that all such information which is
given is both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities in the registration, all stock transfer taxes and all fees and
disbursements of any additional special counsel (other than the special counsel
provided for in Section 10(e)(i) above) retained in connection with each such
registration by the Holder.
(f) Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with (i) any registration,
qualification or compliance pursuant to Section 10(a), and (ii) no more than
three (3) registrations pursuant to Section 10(b). All Selling Expenses shall be
borne by the Holder.
(g) Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder, the officers, directors and partners of
the Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter (within
the meaning of the 0000 Xxx) for the Company, any person who controls such
underwriter, and any other security holder in such registration statement or any
of its partners, directors or officers or any person who controls such security
holder, against any losses, claims, damages or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the 1933 Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable
contribution to joint liability under the 1933 Act in any case in which either
(i) any indemnified party makes a claim under this Section 10(g) or any
controlling person of such indemnified party makes such a claim but is
judicially determined (by entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10(g) provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of any such person seeking indemnity under the terms of this Section 10(g);
then, and in each such case, the Company and such person will contribute to the
aggregate losses, claims, damages, or liabilities to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and
agrees that (i) the Company and certain investors have entered into an Investor
Rights Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii)
the Holder may include his securities in a demand registration under the
Investor Rights Agreement only to the extent that the inclusion of his
securities will not reduce the amount of securities to be registered for parties
to the Investor Rights Agreement and (iii) the Holder shall not make a demand
registration which could result in such registration statement being declared
effective prior six months after the effective date of the Company's initial
public offering of securities pursuant to a registration filed under the 1933
Act or within one hundred twenty (120) days of the effective date of any demand
registration pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to
Section 10 with respect to any request or requests made by the Holder after the
date which is five (5) years following the date of the consummation of the first
sale of securities pursuant to a registration statement filed by the Company
under the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this
Section 10(i), the Company shall not be required to effect any registrations
under the 1933 Act or under any state securities laws on behalf of the Holder
if, in the opinion of counsel to the Company, the offering or transfer by such
Holder in the manner proposed (including, without limitation, the number of
shares proposed to be offered or transferred, the time of sale, and the method
of offering or transfer) is exempt from the registration requirements of the
1933 Act and the securities laws of applicable states and the Company consents
to such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as
the Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu of this Warrant a new
Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of this
Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer.
Dated: May 28, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
---------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES A
PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION
IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after July 6, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Network Storage, Inc., a Delaware corporation (the "Company") up to one hundred
seventy six thousand three hundred sixty four (176,364) fully paid and
nonassessable shares of Common Stock, $0.001 par value, of the Company (as
adjusted pursuant to Section 7 hereof, the "Shares") at the purchase price per
share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with
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the 1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.44 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for
a term beginning on July 7, 1999, (the "Commencement Date") and ending on July
6, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto as Appendix I, to
the Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X=the number of Shares to be issued to the Holder.
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Y= the number of Shares purchasable under this Warrant (at the date of
such exercise).
A= the fair market value of one Share (at the date of such exercise).
B= the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(d) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from the Holder a written request that the Company file a
registration statement under the 1933 Act with respect to shares of Registrable
Securities having an expected aggregate offering price of at least One Million
Dollars ($1,000,000), the Company will, subject to the limitations of Section
9(a)(ii), use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the
closing date of the Company's first registered public offering of its stock
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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(D) After the Company has effected one (1) such
registration pursuant to a Holder's demand under this Section 10(a)(i), which
registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. In such instance, Company shall use its best efforts to cure any such
statement or omission so as to render such statement or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution
to joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section
10 with respect to any request or requests made by the Holder after the date
which is five (5) years following the date of the consummation of the first sale
of securities pursuant to a registration statement filed by the Company under
the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section
10(i), the Company shall not be required to effect any registrations under the
1933 Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: July 7, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
Title: Manager
139
NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS
WARRANT CANNOT BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE SERIES
A PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS SUCH
REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE,
SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after July 19, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Network Storage, Inc., a Delaware corporation (the "Company") up to one hundred
ninety thousand (190,000) fully paid and nonassessable shares of Common Stock,
$0.001 par value, of the Company (as adjusted pursuant to Section 7 hereof, the
"Shares") at the purchase price per share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the
obligations of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities" shall
mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware corporation.
(g) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with
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the 1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the SEC.
(h) The term "Registrable Securities" means: (i) the Common Stock or
other equity or convertible equity securities of the Company issued or issuable
upon exercise of this Warrant; and (ii) any Common Stock of the Company issued
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.50 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder
for a term beginning on July 20, 1999, (the "Commencement Date") and ending on
July 19, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in part
on or before the Expiration Date, the purchase rights evidenced hereby. Such
exercise shall be effected by:
(i) the surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto as Appendix I, to the
Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check payable to
the order of the Company, of an amount equal to the aggregate purchase price
for the number of Shares designated for purchase in the completed subscription
form.
(b) In lieu of exercising this Warrant pursuant to Section 4(a),
the Holder may elect to receive shares equal to the value of this Warrant (or
any portion thereof remaining unexercised) by surrender of this Warrant at the
principal office of the Company together with the Subscription Form, in which
event the Company shall issue to the Holder a number of Shares computed using
the following formula:
X = Y (A-B)
--------
A
Where X = the number of Shares to be issued to the Holder.
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Y = the number of Shares purchasable under this Warrant (at the date of
such exercise).
A = the fair market value of one Share (at the date of such exercise).
B = the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common
Stock quoted in the NASDAQ National Market System or the
Over-the-Counter market or the closing price quoted on any exchange on
which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the
five (5) trading days prior to the date of determination of the fair
market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of
the Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and
the Holder.
(c) Upon the request of the Company, the Holder shall also deliver
to the Company an instrument, in form and substance reasonably satisfactory to
counsel for the Company, executed by the Holder certifying that the Shares are
being acquired for investment purposes only and not with a view to their resale
or distribution.
(c) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto,
as will be sufficient to permit the exercise of this Warrant for the full
number of Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any time
subdivide or combine its outstanding shares of the Common Stock, this Warrant
shall, after that subdivision or combination, evidence the right to purchase
the number of shares of Common Stock that would have been issuable as a result
of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at
any time combine the outstanding shares of Common Stock, the Warrant Price then
in effect immediately before that combination shall be proportionately
increased. Any adjustment under this Section 7(a) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common
Stock which the Holder would have become entitled to purchase but for such
change, a number of shares of such other series or class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to purchase by the Holder on exercise of this Warrant immediately before that
change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets. If at
any time there shall be a capital reorganization of the Company (other than a
combination, reclassification, exchange, or subdivision of shares provided for
elsewhere in this Warrant) or merger or consolidation of the Company with or
into another corporation, or the sale of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such capital reorganization, merger, consolidation or sale, lawful provision
shall be made so that the Holder of this Warrant shall thereafter be entitled
to receive upon exercise of this Warrant, during the period specified in this
Warrant and upon payment of the Warrant Price then in effect, the number of
shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such merger or consolidation, to which a
holder of the Company's Common Stock deliverable upon exercise of this Warrant
would have been entitled in such capital reorganization, merger, consolidation
or sale if this Warrant had been exercised immediately before that capital
reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of each
adjustment or readjustment of the number of shares of the Common Stock or other
securities issuable upon exercise of this Warrant and the Warrant Price to the
registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party
in which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder
of this Warrant at least fifteen (15) days written notice of the proposed
effective date and terms of such offering, transaction or agreements, and if
the Warrant has not been exercised at least before the effective date of such
offering, transaction or agreements, then this Warrant and the rights hereunder
shall be automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be assigned or
transferred, except as provided herein and in accordance with and subject to
the provisions of (i) applicable state securities laws, and (ii) the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(such Act and such rules and regulations being hereinafter collectively
referred to as the "Act"). Any purported transfer or assignment made other than
in accordance with this Section 9 shall be null and void and of no force and
effect.
(b) This Warrant, and any rights hereunder, may be transferred or
assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by surrender of
this Warrant to the Company at its principal office with an assignment duly
executed and funds sufficient to pay any transfer tax. In such event, the
Company shall, without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this Warrant shall be
promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company shall
receive from the Holder a written request that the Company file a registration
statement under the 1933 Act with respect to shares of Registrable Securities
having an expected aggregate offering price of at least One Million Dollars
($1,000,000), the Company will, subject to the limitations of Section 9(a)(ii),
use its best efforts to effect such registration under the 1933 Act (including,
without limitation, appropriate qualification under applicable blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements
or regulations) as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Registrable Securities as
are specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the closing
date of the Company's first registered public offering of its stock (other than
a registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan or a
SEC Rule 145 transaction);
(C) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the closing date of, any initial
registration statement pertaining to securities of the Company (other than a
registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan or a
SEC Rule 145 transaction); provided, however, that the Company is acting in
good faith and using all reasonable efforts to cause such initial registration
statement to become effective;
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(D) After the Company has effected one (1) such
registration pursuant to a Holder's demand under this Section 10(a)(i), which
registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period
not to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the
Holder to registration pursuant to Section 10(a)(i) shall be conditioned upon
such Holder's participation in the underwriting arrangements required by this
Section 10(a)(ii), and the inclusion of the Holder's Registrable Securities in
the underwriting to the extent requested shall be limited to the extent
provided herein.
The Company shall, together with the Holder, enter into an
underwriting agreement in customary form with a managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 10(a), if the managing underwriter advises the Holder in writing
that market factors require a limitation of the number of shares to be
underwritten, then the number of shares of Registrable Securities that may be
included in the registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holder)
any of its securities under the 1933 Act in connection with the public offering
of such securities solely for cash (other than a registration (i) on Form S-8
or any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities, or (ii) with respect to an employee benefit plan, or
(iii) solely in connection with a Rule 145 transaction under the 1933 Act), the
Company shall, each such time, promptly give the Holder written notice of such
registration together with a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under applicable state securities
laws. Upon the written request of the Holder given within twenty (20) business
days after delivery of such written notice by the Company, the Company shall,
subject to the provisions of Section 10(b)(ii), use its best efforts to cause
to be registered under the 1933 Act all of the Registrable Securities that the
Holder has requested to be registered. The Company shall be required to effect
not more than three (3) such registrations of Registrable Securities pursuant
to the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below)
exclude some or all Registrable Securities from such registration and
underwriting.
(c) Obligations of the Company. Whenever required under this Section
9 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing. In such instance, Company shall use its best
efforts to cure any such statement or omission so as to render such statement
or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to
this Section 10, the Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities. In that connection, the Holder
shall be required to represent to the Company that all such information which
is given is both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with (i) any registration,
qualification or compliance pursuant to Section 10(a), and (ii) no more than
three (3) registrations pursuant to Section 10(b). All Selling Expenses shall
be borne by the Holder.
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto; (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated under
the 1933 Act, the 1934 Act or any state securities law; and the Company will
reimburse the Holder, officer, director or partner, underwriter or controlling
person for any legal or other expenses reasonably incurred by them, as
incurred, in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the Company's indemnity
contained in this Section 10(g) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished in writing and expressly stated
for use in connection with such registration by the Holder, or the Holder's
officers, directors or partners, underwriter, or controlling person. The
Company shall not be required to indemnify any person against any liability
arising (i) from any untrue or misleading statement or omission contained in
any preliminary prospectus if such deficiency is corrected in the final
prospectus or (ii) out of the failure of any person to deliver a prospectus as
required by the 1993 Act. The indemnity provided for in this Section 10(g)
shall remain in full force and effect regardless of any investigation made by
or on behalf of such seller, underwriter, participating person or controlling
person and shall survive transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its
partners, directors or officers or any person who controls such security
holder, against any losses, claims, damages or liabilities (joint or several)
to which any of the foregoing persons may become subject, under the 1933 Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by the Holder expressly stated in a writing for use in
connection with such registration; and the Holder will reimburse any legal or
other expenses, as incurred, where same are reasonably incurred by any person
intended to be indemnified pursuant to this Section 10(g), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under this
Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 10(g),
notify the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution to joint
liability under the 1933 Act in any case in which either (i) any indemnified
party makes a claim under this Section 10(g) or any controlling person of such
indemnified party makes such a claim but is judicially determined (by entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after
contribution from others) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission; provided, however, that, in any such case, (A) no
such person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the
Investor Rights Agreement and (iii) the Holder shall not make a demand
registration which could result in such registration statement being declared
effective prior six months after the effective date of the Company's initial
public offering of securities pursuant to a registration filed under the 1933
Act or within one hundred twenty (120) days of the effective date of any demand
registration pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section 10
with respect to any request or requests made by the Holder after the date which
is five (5) years following the date of the consummation of the first sale of
securities pursuant to a registration statement filed by the Company under the
1933 Act in connection with the initial firm commitment underwritten offering
of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section 10(i),
the Company shall not be required to effect any registrations under the 1933
Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of any Common Stock of the Company (other than those
Common Stock shares included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such
period of time (not to exceed one hundred eighty (180) days) from the closing
date of such registration as may be requested by the underwriters; provided,
however, that such covenants shall apply only if (i) all of the officers and
directors of the Company who own stock of the Company and (ii) each shareholder
owning more than two percent (2%) of the Company's shares also agree to such
restrictions on any shares not being registered in such offering. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of the Holder (and the
shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu of this Warrant a new
Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any
purpose, nor shall anything in this Warrant be construed to confer on any
Holder of this Warrant, as such, any rights of a shareholder of the Company or
any right to vote, give or withhold consent to any corporate action, to receive
notice of meetings of stockholders (except as set forth in this Warrant), to
receive dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and construed
and enforced in accordance with the laws of the State of California applicable
to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of this
Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of
recognized reputation or of recognized international reputation in the event of
an international delivery or (iv) transmitted by telecopier (with confirmation
by air mail or courier), to the address furnished to the Company in writing by
the last holder of this Warrant who shall have furnished an address to the
Company in accordance with the provisions of this Section 11(e). Except as
otherwise specified herein, communications shall be deemed to have been duly
given on (A) the date of receipt if delivered personally, (B) the date seven
(7) days after posting if transmitted by mail, (C) the date three (3) days
after delivery to the courier if sent by recognized or internationally
recognized courier service, or (D) the date on which written confirmation would
be deemed to
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have been given as provided above, whether by mail or by courier, as
applicable, if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: July 20, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS WARRANT CANNOT
BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL
THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER
THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after August 8, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Network Storage, Inc., a Delaware corporation (the "Company") up to sixty
thousand (60,000) fully paid and nonassessable shares of Common Stock, $0.001
par value, of the Company (as adjusted pursuant to Section 7 hereof, the
"Shares") at the purchase price per share specified in Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of the effectiveness of such registration statement or document by the
SEC.
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(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.50 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder
for a term beginning on August 9, 1999, (the "Commencement Date") and ending on
August 8, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a duly
executed copy of the form of subscription attached hereto as Appendix I, to the
Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
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Y = the number of Shares purchasable under this Warrant (at the date of
such exercise).
A = the fair market value of one Share (at the date of such exercise).
B = the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common
Stock quoted in the NASDAQ National Market System or the
Over-the-Counter market or the closing price quoted on any exchange on
which the Common Stock is listed, whichever is applicable, as published
in the Western Edition of The Wall Street Journal for the five (5)
trading days prior to the date of determination of the fair market
value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(c) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
purchase price therefor shall be subject to adjustment from time to time as
follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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157
(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be assigned
or transferred, except as provided herein and in accordance with and subject to
the provisions of (i) applicable state securities laws, and (ii) the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(such Act and such rules and regulations being hereinafter collectively referred
to as the "Act"). Any purported transfer or assignment made other than in
accordance with this Section 9 shall be null and void and of no force and
effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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158
expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company shall
receive from the Holder a written request that the Company file a registration
statement under the 1933 Act with respect to shares of Registrable Securities
having an expected aggregate offering price of at least One Million Dollars
($1,000,000), the Company will, subject to the limitations of Section 9(a)(ii),
use its best efforts to effect such registration under the 1933 Act (including,
without limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act;
(B) Prior to the six (6) months after the closing
date of the Company's first registered public offering of its stock (other than
a registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan or a
SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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159
(D) After the Company has effected one (1) such
registration pursuant to a Holder's demand under this Section 10(a)(i), which
registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration
pursuant to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back
Registration. The right of the Holder to registration pursuant to Section
10(b)(i) shall be conditioned upon the Holder's participation in such
underwriting and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent provided herein. The Holder shall (together with the
Company and any other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by the Company. Notwithstanding any other
provision of Section 10(b)(i) and this Section 10(b)(ii), if the underwriter
determines that market factors require a limitation of the number of shares to
be underwritten, the underwriter may (subject to the allocation priority set
forth below) exclude some or all Registrable Securities from such registration
and underwriting.
(c) Obligations of the Company. Whenever required under this
Section 9 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holder, keep such registration statement effective for up to one hundred
twenty (120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement with
terms generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. In such instance, Company shall use its best
efforts to cure any such statement or omission so as to render such statement or
omission not misleading.
(d) Furnish Information. In connection with any action pursuant
to this Section 10, the Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of their Registrable Securities. In that connection, the Holder
shall be required to represent to the Company that all such information which is
given is both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities in the registration, all stock transfer taxes and all fees and
disbursements of any additional special counsel (other than the special counsel
provided for in Section 10(e)(i) above) retained in connection with each such
registration by the Holder.
(f) Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with (i) any registration,
qualification or compliance pursuant to Section 10(a), and (ii) no more than
three (3) registrations pursuant to Section 10(b). All Selling Expenses shall be
borne by the Holder.
(g) Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder, the officers, directors and partners of
the Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter (within
the meaning of the 0000 Xxx) for the Company, any person who controls such
underwriter, and any other security holder in such registration statement or any
of its partners, directors or officers or any person who controls such security
holder, against any losses, claims, damages or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the 1933 Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable
contribution to joint liability under the 1933 Act in any case in which either
(i) any indemnified party makes a claim under this Section 10(g) or any
controlling person of such indemnified party makes such a claim but is
judicially determined (by entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10(g) provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of any such person seeking indemnity under the terms of this Section 10(g);
then, and in each such case, the Company and such person will contribute to the
aggregate losses, claims, damages, or liabilities to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and
agrees that (i) the Company and certain investors have entered into an Investor
Rights Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii)
the Holder may include his securities in a demand registration under the
Investor Rights Agreement only to the extent that the inclusion of his
securities will not reduce the amount of securities to be registered for parties
to the Investor Rights Agreement and (iii) the Holder shall not make a demand
registration which could result in such registration statement being declared
effective prior six months after the effective date of the Company's initial
public offering of securities pursuant to a registration filed under the 1933
Act or within one hundred twenty (120) days of the effective date of any demand
registration pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to
Section 10 with respect to any request or requests made by the Holder after the
date which is five (5) years following the date of the consummation of the first
sale of securities pursuant to a registration statement filed by the Company
under the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this
Section 10(i), the Company shall not be required to effect any registrations
under the 1933 Act or under any state securities laws on behalf of the Holder
if, in the opinion of counsel to the Company, the offering or transfer by such
Holder in the manner proposed (including, without limitation, the number of
shares proposed to be offered or transferred, the time of sale, and the method
of offering or transfer) is exempt from the registration requirements of the
1933 Act and the securities laws of applicable states and the Company consents
to such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu of this Warrant a new
Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of this
Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer.
Dated: August 9, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
-------------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS WARRANT CANNOT
BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL
THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER
THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after August 11, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Network Storage, Inc., a Delaware corporation (the "Company") up to thirty
thousand seven hundred sixty nine (30,769) fully paid and nonassessable shares
of Common Stock, $0.001 par value, of the Company (as adjusted pursuant to
Section 7 hereof, the "Shares") at the purchase price per share specified in
Section 2 below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act, and the
declaration or ordering of the effectiveness of such registration statement or
document by the SEC.
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(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $0.65 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder for
a term beginning on August 12, 1999, (the "Commencement Date") and ending on
August 11, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto as Appendix I, to
the Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
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Y = the number of Shares purchasable under this Warrant (at the date of
such exercise).
A = the fair market value of one Share (at the date of such exercise).
B = the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the NASDAQ National Market System or the Over-the-Counter
market or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the five (5) trading days prior
to the date of determination of the fair market value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(d) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the purchase
price therefor shall be subject to adjustment from time to time as follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be
assigned or transferred, except as provided herein and in accordance with and
subject to the provisions of (i) applicable state securities laws, and (ii) the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (such Act and such rules and regulations being hereinafter
collectively referred to as the "Act"). Any purported transfer or assignment
made other than in accordance with this Section 9 shall be null and void and of
no force and effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company
shall receive from the Holder a written request that the Company file a
registration statement under the 1933 Act with respect to shares of Registrable
Securities having an expected aggregate offering price of at least One Million
Dollars ($1,000,000), the Company will, subject to the limitations of Section
9(a)(ii), use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the 1933 Act;
(B) Prior to the six (6) months after the
closing date of the Company's first registered public offering of its stock
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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(D) After the Company has effected one (1)
such registration pursuant to a Holder's demand under this Section 10(a)(i),
which registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration pursuant
to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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174
(ii) Underwriting Requirements in Piggy-back Registration. The
right of the Holder to registration pursuant to Section 10(b)(i) shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
Section 10(b)(i) and this Section 10(b)(ii), if the underwriter determines that
market factors require a limitation of the number of shares to be underwritten,
the underwriter may (subject to the allocation priority set forth below) exclude
some or all Registrable Securities from such registration and underwriting.
(c) Obligations of the Company. Whenever required under this Section 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to one hundred twenty
(120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with terms
generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. In such instance, Company shall use its best efforts to cure any such
statement or omission so as to render such statement or omission not misleading.
(d) Furnish Information. In connection with any action pursuant to this
Section 10, the Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, the Holder shall be
required to represent to the Company that all such information which is given is
both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities in
the registration, all stock transfer taxes and all fees and disbursements of any
additional special counsel (other than the special counsel provided for in
Section 10(e)(i) above) retained in connection with each such registration by
the Holder.
(f) Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with (i) any registration, qualification or
compliance pursuant to Section 10(a), and (ii) no more than three (3)
registrations pursuant to Section 10(b). All Selling Expenses shall be borne by
the Holder.
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers, directors and partners of the
Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 0000 Xxx) for the Company, any person who controls such underwriter, and
any other security holder in such registration statement or any of its partners,
directors or officers or any person who controls such security holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable contribution
to joint liability under the 1933 Act in any case in which either (i) any
indemnified party makes a claim under this Section 10(g) or any controlling
person of such indemnified party makes such a claim but is judicially determined
(by entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 10(g) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of any such person
seeking indemnity under the terms of this Section 10(g); then, and in each such
case, the Company and such person will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and agrees that
(i) the Company and certain investors have entered into an Investor Rights
Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii) the
Holder may include his securities in a demand registration under the Investor
Rights Agreement only to the extent that the inclusion of his securities will
not reduce the amount of securities to be registered for parties to the Investor
Rights Agreement and (iii) the Holder shall not make a demand registration which
could result in such registration statement being declared effective prior six
months after the effective date of the Company's initial public offering of
securities pursuant to a registration filed under the 1933 Act or within one
hundred twenty (120) days of the effective date of any demand registration
pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to Section
10 with respect to any request or requests made by the Holder after the date
which is five (5) years following the date of the consummation of the first sale
of securities pursuant to a registration statement filed by the Company under
the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this Section
10(i), the Company shall not be required to effect any registrations under the
1933 Act or under any state securities laws on behalf of the Holder if, in the
opinion of counsel to the Company, the offering or transfer by such Holder in
the manner proposed (including, without limitation, the number of shares
proposed to be offered or transferred, the time of sale, and the method of
offering or transfer) is exempt from the registration requirements of the 1933
Act and the securities laws of applicable states and the Company consents to
such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu of this
Warrant a new Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of
this Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
Dated: August 12, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
---------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THIS WARRANT CANNOT
BE EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL
THEY ARE SO REGISTERED OR UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER
THE CIRCUMSTANCES OF SUCH EXERCISE, SALE OR TRANSFER.
CHAPARRAL NETWORK STORAGE, INC.
WARRANT TO PURCHASE COMMON STOCK
OF CHAPARRAL NETWORK STORAGE, INC.
Void after November 4, 2004
This certifies that, subject to the terms and conditions set forth
herein, for value received, Sentinel Consulting LLC., a Delaware corporation,
(the "Holder") or its registered assigns is entitled to purchase from Chaparral
Network Storage, Inc., a Delaware corporation (the "Company") up to twenty six
thousand six hundred sixty seven (26,667) fully paid and nonassessable shares of
Common Stock, $0.001 par value, of the Company (as adjusted pursuant to Section
7 hereof, the "Shares") at the purchase price per share specified in Section 2
below.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Common Stock", when used with reference to stock of the
Company, means all shares, now or hereafter authorized, of the class of Common
Stock, $0.001 par value, of the Company currently authorized and shares of any
other class into which those shares may hereafter be changed.
(b) "Company" means Chaparral Network Storage, Inc. a Delaware
corporation and any corporation which shall succeed to or assume the obligations
of the Company under this Warrant.
(c) "1933 Act" means the Securities Act of 1933, as amended.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Convertible equity securities" or "equity securities"
shall mean any of the Company's securities.
(f) "Holder" means Sentinel Consulting, LLC, a Delaware
corporation.
(g) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of the effectiveness of such registration statement or document by the
SEC.
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(h) The term "Registrable Securities" means: (i) the Common
Stock or other equity or convertible equity securities of the Company issued or
issuable upon exercise of this Warrant; and (ii) any Common Stock of the Company
issued (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock.
2. Warrant Price. The purchase price to be paid upon exercise of this
Warrant is U.S. $3.00 per share of Common Stock. 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 "Warrant Price").
3. Exercise Period. This Warrant shall be exercisable by the Holder
for a term beginning on November 4, 1999, (the "Commencement Date") and ending
on November 4, 2004, (the "Expiration Date").
4. Method of Exercise.
(a) The Holder may exercise from time to time, in whole or in
part on or before the Expiration Date, the purchase rights evidenced hereby.
Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a duly
executed copy of the form of subscription attached hereto as Appendix I, to the
Secretary of the Company at its principal offices; and
(ii) the payment to the Company, in cash or by check
payable to the order of the Company, of an amount equal to the aggregate
purchase price for the number of Shares designated for purchase in the completed
subscription form.
(b) In lieu of exercising this Warrant pursuant to Section
4(a), the Holder may elect to receive shares equal to the value of this Warrant
(or any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with the Subscription Form, in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
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Y = the number of Shares purchasable under this Warrant (at the date of
such exercise).
A = the fair market value of one Share (at the date of such exercise).
B = the Warrant Price (as adjusted to the date of such exercise).
For purposes of this subsection fair market value of one Share shall mean:
(i) The average of the closing bid and asked prices of the Common
Stock quoted in the NASDAQ National Market System or the
Over-the-Counter market or the closing price quoted on any exchange on
which the Common Stock is listed, whichever is applicable, as published
in the Western Edition of The Wall Street Journal for the five (5)
trading days prior to the date of determination of the fair market
value; or
(ii) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be determined in good faith by
the Company's Board of Directors. If the Holder disagrees with the
determination by the Board of Directors of the fair market value of the
Common Stock then such fair market value shall be determined by an
independent appraiser selected jointly by the Company and the Holder.
The cost of such appraisal shall be paid equally by the Company and the
Holder.
(c) Upon the request of the Company, the Holder shall also
deliver to the Company an instrument, in form and substance reasonably
satisfactory to counsel for the Company, executed by the Holder certifying that
the Shares are being acquired for investment purposes only and not with a view
to their resale or distribution.
(c) In the event of a partial exercise of this Warrant, a new
Warrant shall be issued to the Holder representing the balance of the Shares
purchasable under this Warrant, such new Warrant to be issued within ten (10)
days after delivery of the subscription notice.
5. Certificate for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder as soon as practicable
following receipt of the completed subscription form and payment for the Shares
being purchased and in any event within ten (10) days thereafter. The Company
shall not be required to issue any fractional shares upon the exercise of the
Holder's purchaser rights under this Warrant. In lieu of any fractional shares,
the Company shall pay cash equal to such fraction multiplied by the per share
market price of the Common Stock as of the date of exercise.
6. Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Series A Preferred
Stock and Common Stock, free from all preemptive rights with respect thereto, as
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein and the conversion of the Shares into
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Common Stock. The Company further covenants that such Shares, when issued
pursuant to the exercise of this Warrant, will, upon issuance, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7. Adjustment of Warrant Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
purchase price therefor shall be subject to adjustment from time to time as
follows:
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of the Common Stock, this
Warrant shall, after that subdivision or combination, evidence the right to
purchase the number of shares of Common Stock that would have been issuable as a
result of that change with respect to the shares of the Common Stock which were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other series or class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase, in lieu of Common Stock
which the Holder would have become entitled to purchase but for such change, a
number of shares of such other series or class or classes of stock equivalent to
the number of shares of Common Stock that would have been subject to purchase by
the Holder on exercise of this Warrant immediately before that change.
(c) Reorganization, Mergers, Consolidations or Sale of Assets.
If at any time there shall be a capital reorganization of the Company (other
than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere in this Warrant) or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such capital reorganization, merger, consolidation or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Company's Common Stock deliverable upon
exercise of this Warrant would have been entitled in such capital
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that capital reorganization, merger, consolidation or sale.
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(d) Notice of Adjustments. The Company shall give notice of
each adjustment or readjustment of the number of shares of the Common Stock or
other securities issuable upon exercise of this Warrant and the Warrant Price to
the registered Holder of this Warrant at that Holder's address as shown on the
Company's books within twenty (20) days after the occurrence of the event
resulting in such adjustment.
(e) No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of the Common Stock
purchasable upon its exercise. A Warrant issued after any adjustment upon any
partial exercise or in replacement may continue to express the same number of
shares of Common Stock (appropriately reduced in the case of partial exercise)
as are stated on the face of this Warrant as initially issued, and that number
of shares shall be considered to have been so changed at the close of business
on the date of adjustment.
8. Automatic Termination. In the event of (i) the closing of the
Company's registration statement on a Form S-1 (or any other form equivalent
thereto) pursuant to which any class of the Company's securities is sold to the
public in a public offering registered under the Securities Act of 1933, as
amended; or (ii) the proposed sale of all or substantially all the capital
stock, or substantially all the assets, of the Company in a merger, business
combination, or other form of business transaction with or into a third party in
which the Company's stockholders do not own at least a majority of the
outstanding voting securities of the surviving corporation or business entity
after such transaction (based solely on such Company stockholders' holdings of
the Company prior to the transaction), then the Company shall give the Holder of
this Warrant at least fifteen (15) days written notice of the proposed effective
date and terms of such offering, transaction or agreements, and if the Warrant
has not been exercised at least before the effective date of such offering,
transaction or agreements, then this Warrant and the rights hereunder shall be
automatically terminated.
9. Exercise, Transfer and Exchange Restrictions.
(a) This Warrant, and any rights hereunder, may not be assigned
or transferred, except as provided herein and in accordance with and subject to
the provisions of (i) applicable state securities laws, and (ii) the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(such Act and such rules and regulations being hereinafter collectively referred
to as the "Act"). Any purported transfer or assignment made other than in
accordance with this Section 9 shall be null and void and of no force and
effect.
(b) This Warrant, and any rights hereunder, may be transferred
or assigned only with the prior written consent of the Company, which shall be
granted only upon receipt by the Company of an opinion of counsel satisfactory
to the Company that (i) the transferee is a person to whom this Warrant may be
legally transferred without registration under the Act, and (ii) such transfer
will not violate any applicable law or governmental rule or regulation,
including, without limitation, any applicable federal or state securities law.
Prior to the transfer or assignment, the assignor or transferor shall reimburse
the Company for its reasonable
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186
expenses, including transfer taxes and attorneys' fees, incurred in connection
with the transfer or assignment.
(c) Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with an
assignment duly executed and funds sufficient to pay any transfer tax. In such
event, the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment and this Warrant
shall be promptly canceled.
10. Registration Rights.
(a) Requested Registration.
(i) Request for Registration. In case the Company shall
receive from the Holder a written request that the Company file a registration
statement under the 1933 Act with respect to shares of Registrable Securities
having an expected aggregate offering price of at least One Million Dollars
($1,000,000), the Company will, subject to the limitations of Section 9(a)(ii),
use its best efforts to effect such registration under the 1933 Act (including,
without limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 10(a)(i):
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act;
(B) Prior to the six (6) months after the closing
date of the Company's first registered public offering of its stock (other than
a registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan or a
SEC Rule 145 transaction);
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the closing date of, any
initial registration statement pertaining to securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction); provided, however, that the Company is
acting in good faith and using all reasonable efforts to cause such initial
registration statement to become effective;
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(D) After the Company has effected one (1) such
registration pursuant to a Holder's demand under this Section 10(a)(i), which
registration has been declared effective; or
(E) If the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 10(a)(i) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holder; provided, however, that the Company may not make such
certification more than once every twelve (12) months.
(ii) Underwriting. In the event that a registration
pursuant to Section 10(a)(i) is for a registered public offering involving an
underwriting, the Company shall so advise the Holder and the right of the Holder
to registration pursuant to Section 10(a)(i) shall be conditioned upon such
Holder's participation in the underwriting arrangements required by this Section
10(a)(ii), and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall, together with the Holder, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
10(a), if the managing underwriter advises the Holder in writing that market
factors require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities that may be included in the
registration shall be so limited.
(b) Piggy-back Registration Rights.
(i) Piggy-back Registration Rights. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holder) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration (i) on
Form S-8 or any form which does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of the Registrable Securities, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the 1933
Act), the Company shall, each such time, promptly give the Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of the Holder given within twenty (20)
business days after delivery of such written notice by the Company, the Company
shall, subject to the provisions of Section 10(b)(ii), use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities that
the Holder has requested to be registered. The Company shall be required to
effect not more than three (3) such registrations of Registrable Securities
pursuant to the request of the Holder under this Section 10(b).
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(ii) Underwriting Requirements in Piggy-back
Registration. The right of the Holder to registration pursuant to Section
10(b)(i) shall be conditioned upon the Holder's participation in such
underwriting and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent provided herein. The Holder shall (together with the
Company and any other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by the Company. Notwithstanding any other
provision of Section 10(b)(i) and this Section 10(b)(ii), if the underwriter
determines that market factors require a limitation of the number of shares to
be underwritten, the underwriter may (subject to the allocation priority set
forth below) exclude some or all Registrable Securities from such registration
and underwriting.
(c) Obligations of the Company. Whenever required under this
Section 9 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holder, keep such registration statement effective for up to one hundred
twenty (120) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by the Holder, to the extent required by such
jurisdiction if the Holder does elect to withdraw from the registration after
notice of such requirement.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement with
terms generally satisfactory to the managing
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underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement.
(vi) Notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. In such instance, Company shall use its best
efforts to cure any such statement or omission so as to render such statement or
omission not misleading.
(d) Furnish Information. In connection with any action pursuant
to this Section 10, the Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of their Registrable Securities. In that connection, the Holder
shall be required to represent to the Company that all such information which is
given is both complete and accurate in all material respects when made.
(e) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 10 hereof, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowances, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and expenses of one special counsel retained in
connection with each such registration by the Holder, blue sky fees and
disbursements, and the expense of any special audits incident to or required by
any registration pursuant to Section 10(a) (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
(ii) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities in the registration, all stock transfer taxes and all fees and
disbursements of any additional special counsel (other than the special counsel
provided for in Section 10(e)(i) above) retained in connection with each such
registration by the Holder.
(f) Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with (i) any registration,
qualification or compliance pursuant to Section 10(a), and (ii) no more than
three (3) registrations pursuant to Section 10(b). All Selling Expenses shall be
borne by the Holder.
(g) Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 10:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder, the officers, directors and partners of
the Holder, any underwriter (as
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defined in the 0000 Xxx) for the Holder and each person, if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse the
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company's indemnity contained in this
Section 10(g) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished in writing and expressly stated for use in connection with
such registration by the Holder, or the Holder's officers, directors or
partners, underwriter, or controlling person. The Company shall not be required
to indemnify any person against any liability arising (i) from any untrue or
misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or (ii) out of the failure of
any person to deliver a prospectus as required by the 1993 Act. The indemnity
provided for in this Section 10(g) shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(ii) To the extent permitted by law, the Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter (within
the meaning of the 0000 Xxx) for the Company, any person who controls such
underwriter, and any other security holder in such registration statement or any
of its partners, directors or officers or any person who controls such security
holder, against any losses, claims, damages or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the 1933 Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly stated in a writing for use in connection with
such registration; and the Holder will reimburse any legal or other expenses, as
incurred, where same are reasonably incurred by any person intended to be
indemnified pursuant to this Section 10(g), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
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agreement contained in this Section 10(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the liability of
each Holder under this Section 10(g) shall be limited to an amount equal to the
public offering price of the shares sold by the Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 10(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10(g), notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
to be paid by the indemnifying party if the indemnified party reasonably
determines that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 10(g), but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10(g).
(iv) In order to provide for just and equitable
contribution to joint liability under the 1933 Act in any case in which either
(i) any indemnified party makes a claim under this Section 10(g) or any
controlling person of such indemnified party makes such a claim but is
judicially determined (by entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10(g) provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of any such person seeking indemnity under the terms of this Section 10(g);
then, and in each such case, the Company and such person will contribute to the
aggregate losses, claims, damages, or liabilities to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
person shall be required to contribute any amount in excess of the public
offering price of all such Registrable Securities sold by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(h) Investor Rights Agreement. The Holder acknowledges and
agrees that (i) the Company and certain investors have entered into an Investor
Rights Agreement dated November, 1998 (the "Investor Rights Agreement"), (ii)
the Holder may include his securities in a demand registration under the
Investor Rights Agreement only to the extent that the inclusion of his
securities will not reduce the amount of securities to be registered for parties
to the Investor Rights Agreement and (iii) the Holder shall not make a demand
registration which could result in such registration statement being declared
effective prior six months after the effective date of the Company's initial
public offering of securities pursuant to a registration filed under the 1933
Act or within one hundred twenty (120) days of the effective date of any demand
registration pursuant to the Investor Rights Agreement.
(i) Termination of Registration Rights.
(i) The Company shall have no obligations pursuant to
Section 10 with respect to any request or requests made by the Holder after the
date which is five (5) years following the date of the consummation of the first
sale of securities pursuant to a registration statement filed by the Company
under the 1933 Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(ii) Notwithstanding any contrary provision of this
Section 10(i), the Company shall not be required to effect any registrations
under the 1933 Act or under any state securities laws on behalf of the Holder
if, in the opinion of counsel to the Company, the offering or transfer by such
Holder in the manner proposed (including, without limitation, the number of
shares proposed to be offered or transferred, the time of sale, and the method
of offering or transfer) is exempt from the registration requirements of the
1933 Act and the securities laws of applicable states and the Company consents
to such transfer, if required.
11. "Market Stand-off" Agreement. The Holder agrees, so long as the
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial underwritten public
offering of the Company's securities that, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the closing date of such
registration as may be requested by the underwriters; provided, however, that
such covenants shall apply only if (i) all of the officers and directors of the
Company who own stock of the Company and (ii) each shareholder owning more than
two percent (2%) of the Company's shares also agree to such restrictions on any
shares not being registered in such offering. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Holder (and the shares
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of securities of every other person subject to the foregoing restriction) until
the end of such period.
12. Miscellaneous Provisions.
(a) Listing. If any shares of the Common Stock required to be
reserved for issuance upon the exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or state law
(other than the Securities Act, as then in effect, or any similar Federal law
then in effect), or listing on any domestic securities exchange, before such
shares may be issued upon such exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
(b) Replacement. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu of this Warrant a new
Warrant of like tenor.
(c) No Rights as Stockholder. Prior to the exercise of this
Warrant, no Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be considered a stockholder of the Company for any purpose,
nor shall anything in this Warrant be construed to confer on any Holder of this
Warrant, as such, any rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action, to receive notice of
meetings of stockholders (except as set forth in this Warrant), to receive
dividends or subscription rights or otherwise.
(d) Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed in California by
California residents.
(e) Notices. All notices from the Company to the holder of this
Warrant shall be in writing and shall be (i) personally delivered, (ii)
transmitted by mail, postage prepaid, registered or certified, return receipt
requested, or by air mail in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of recognized
reputation or of recognized international reputation in the event of an
international delivery or (iv) transmitted by telecopier (with confirmation by
air mail or courier), to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in accordance with the provisions of this Section 11(e). Except as otherwise
specified herein, communications shall be deemed to have been duly given on (A)
the date of receipt if delivered personally, (B) the date seven (7) days after
posting if transmitted by mail, (C) the date three (3) days after delivery to
the courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to
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have been given as provided above, whether by mail or by courier, as applicable,
if transmitted by telecopier, whichever shall first occur.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer.
Dated: November 4, 1999.
CHAPARRAL NETWORK STORAGE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President Finance
Acknowledged and Agreed:
Sentinel Consulting LLC.
By: /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
Title: Manager
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