EXHIBIT 4.02
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
(THESE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN EXEMPTION UNDER SUCH LAWS, TOGETHER WITH, IN CERTAIN CASES, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN VOTING AGREEMENTS AS SET FORTH IN
A STOCKHOLDERS AGREEMENT, AS AMENDED FROM TIME TO TIME, BY AND AMONG
THE REGISTERED OWNER OF THIS CERTIFICATE, THE COMPANY AND CERTAIN
OTHER HOLDERS OF SECURITIES OF THE COMPANY, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE OFFICES OF THE SECRETARY OF THE
COMPANY.
XXX.XXX, INC.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
Date of Issuance:___________ Certificate No. W-______
THIS CERTIFIES THAT, for value received, [________] and its assigns are
entitled to subscribe for and purchase [_______] shares of duly authorized,
validly issued, fully paid and nonassessable Common Stock (as adjusted pursuant
to Section 4 hereof, the "Shares") of XXX.XXX, INC., a Delaware corporation (the
"Company"), at the price of $0.38 per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 4
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein the term
"Date of Grant" shall mean [SecondClosing Date] [NOTE: Date of Grant for Initial
Warrants shall be the Initial Closing Date.]. The term "Warrant" as used herein
shall be deemed to include any warrants issued upon transfer or partial exercise
of this Warrant unless the context clearly requires otherwise. Capitalized terms
used but not otherwise defined herein shall have the respective meaning ascribed
to them in the Note and Warrant Purchase Agreement dated as of July 18, 2003 by
and among the Company and the Investors listed on Schedule A and Schedule B
thereto (the "Purchase Agreement").
1. Term. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time and from time to time from the Date of Grant
through the date three (3) years after the Initial Closing Date. [NOTE: The
Initial Warrants will contain the following language: The holder of this Warrant
shall not (a) exercise this Warrant or (b) transfer or otherwise dispose of this
Warrant to a third party, unless such third party has agreed to be bound by the
terms of Sections 3.8 and 3.9 of the Purchase Agreement, in each case until the
date that is the earlier of: (x) the failure by the Company to pay the
Termination Amount on or before the second business day after receipt by the
Company of the Termination Notice in accordance with Section 1.5 of the Purchase
Agreement; and (y) the Second Closing Date. If the Purchase Agreement is
terminated and the Termination Amount is paid on or before the second business
day after receipt by the Company of the Termination Notice in accordance with
Section 1.5 of the Purchase Agreement, this Warrant shall be null and void in
its entirety and of no further force and effect.]
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, the purchase right represented by this Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, at the election of the
holder hereof, by (a) the surrender of this Warrant (with the notice of exercise
substantially in the form attached hereto as Exhibit A-1 duly completed and
executed) at the principal office of the Company and the payment to the Company,
by certified or bank check, or by wire transfer to an account designated by the
Company (a "Wire Transfer") of an amount equal to the then applicable Warrant
Price multiplied by the number of Shares then being purchased, or (b) if in
connection with a registered public offering of the Company's securities, the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A-2 duly completed and executed) at the principal office of the Company
together with notice of arrangements reasonably satisfactory to the Company for
payment to the Company either by certified or bank check or by Wire Transfer
from the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased, or (c) exercise of the
"net issuance" right provided for in Section 10.2 hereof, or (d) the tender of
all or a portion of a Senior Secured Promissory Note issued by the Company
pursuant to the Purchase Agreement in a principal amount equal to the then
applicable Warrant Price multiplied by the number of Shares then being
purchased. The person or persons in whose name(s) any certificate(s)
representing the Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon as
practicable and, if requested by the holder of this Warrant, the Company shall
cause its transfer agent to deliver the certificate representing Shares issued
upon exercise of this Warrant to a broker or other person (as directed by the
holder exercising this Warrant) within the time period required to settle any
trade made by the holder after exercise of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
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(a) Reclassification or Merger. In case of any reclassification or change
of securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than a merger with
another corporation in which the Company is the surviving corporation and which
does not result in any reclassification or change of outstanding securities
issuable upon exercise of this Warrant), the Company, or such surviving
corporation, as the case may be, shall duly execute and deliver to the holder of
this Warrant a new Warrant (which, if not in substantially the form of this
Warrant, shall be in form and substance satisfactory to the holder of this
Warrant), or the Company shall make appropriate provision without the issuance
of a new Warrant, so that the holder of this Warrant shall have the right to
receive upon exercise of this Warrant, at a total purchase price not to exceed
that payable upon the exercise of the then unexercised portion of this Warrant,
and in lieu of the shares of Common Stock theretofore issuable upon exercise of
this Warrant, the kind and amount of shares of stock, other securities, money
and property receivable upon such reclassification, change or merger by a holder
of the number of shares of Common Stock purchasable under this Warrant
immediately preceding the consummation of such reclassification or merger. Such
new Warrant shall provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4. The
provisions of this subparagraph (a) shall similarly apply to successive
reclassifications, changes and mergers.
(b) Subdivision or Combination of Shares. If the Company at any time while
this Warrant remains outstanding and unexpired shall subdivide or combine its
outstanding shares of Common Stock, the Warrant Price shall be proportionately
decreased and the number of Shares issuable hereunder shall be proportionately
increased in the case of a subdivision and the Warrant Price shall be
proportionately increased and the number of Shares issuable hereunder shall be
proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to its Common Stock payable in Common Stock, then the Warrant Price
shall be adjusted, from and after the record date fixed for the determination of
the shareholders of the Company entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (A) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (B) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 4(a) and 4(b)), then, in each such case,
provision shall be made by the Company such that the holder of this Warrant
shall receive upon exercise of this Warrant a proportionate share of any such
dividend or distribution as though it were the holder of the Shares as of the
record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.
(d) Adjustment for Issuance of Shares of Common Stock Below Warrant Price.
If the Company shall issue, or be deemed to issue (as provided below), any
additional shares of Common Stock other than Excluded Stock, as defined below
("Additional Shares of Common Stock") for a consideration per share less than
the Warrant Price in effect immediately prior to the issuance of
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such Additional Shares of Common Stock (excluding stock splits, stock dividends,
combinations, reclassifications and capital reorganizations which are covered in
Sections 4(a), 4(b) and 4(c) above), the Warrant Price shall be reduced
concurrent with each such issuance to a price calculated as follows:
Adjusted Warrant Price = (Outstanding Stock x Warrant Price) + Additional Stock
Consideration Outstanding Stock + No. of Additional Shares of Common Stock
As used herein:
"Additional Stock Consideration" means the consideration received by the Company
upon the issuance of the Additional Shares of Common Stock.
"Convertible Securities" means any evidence of indebtedness, shares or
securities, in each case convertible into or exchange for Additional Shares of
Common Stock.
"Excluded Stock" means; (a) securities issued, or deemed issued (as provided
below), to directors, officers, employees or consultants of the Company or a
subsidiary of the Company in connection with their service as directors of the
Company or a subsidiary of the Company, their employment by the Company or a
subsidiary of the Company or their retention as consultants by the Company or a
subsidiary of the Company under the Company's Amended and Restated 1999 Stock
Plan, the Vector Internet Services Inc. 1997 Stock Option Plan, the Vector
Internet Services Inc. 1999 Stock Option Plan, the Company's 1999 Employee Stock
Purchase Plan or the Company's Amended and Restated 2001 Stock Option and
Incentive Plan (the "Plans"), plus such additional number of shares issued or
issuable to directors, officers, employees or consultants of the Company or a
subsidiary of the Company under any amendment of the Plans, or under other
plans, adopted or assumed by the Company with the approval of the Board of
Directors of the Company, plus such number of shares of Common Stock which are
repurchased by the Company from such persons pursuant to contractual rights held
by the Company and at repurchase prices not exceeding the respective original
purchase prices paid by such persons to the Company therefor; (b) shares of
Common Stock issuable upon exercise of warrants outstanding as of the date
hereof; (c) shares of Common Stock issued, or deemed issued (as provided below),
pursuant to a merger, consolidation or stock or asset acquisition approved by
the Company's Board of Directors; (d) shares of Common Stock issuable upon the
conversion of the Series X Preferred Stock or the Series Y Preferred Stock; (e)
shares of Common Stock issued as payment of interest in accordance with the
terms of the Notes issued pursuant to the Purchase Agreement; and (f) the
issuance, or deemed issuance, of securities of the Company for any purpose and
in any amount as approved by the Company's Board of Directors, including the
approval of (i) a majority of the Series X Directors, (ii) the Series Y Director
(as defined in the Amended and Restated Stockholders Agreement dated, as of July
18, 2003 among the Company and the Investors named therein (the "Stockholders
Agreement")), if any, and (iii) the Warrant Investor Directors (as defined in
the Stockholders Agreement), if any.
"No. of Additional Shares of Common Stock" means the number of units of
Additional Shares of Common Stock issued in connection with the issuance of the
same.
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"Options" means rights, options or warrants to subscribe for, purchase or
otherwise acquire shares of Common Stock or Convertible Securities.
"Outstanding Stock" means the total number of shares of Common Stock outstanding
plus the total number of shares of Common Stock issuable upon conversion or
exercise of outstanding Convertible Securities (including this Warrant and all
other warrants) immediately prior to the issuance of the Additional Shares of
Common Stock; provided that the number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company.
No adjustment in the Warrant Price need be made if such adjustment would result
in a change in the Warrant Price of less than $0.01. Any such adjustment which
is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in the Warrant Price. No adjustment in the
Warrant Price of this Warrant shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for such
Additional Shares of Common Stock issued or deemed to be issued (as provided
below) by the Company is less than the Warrant Price then in effect on the date
of, and immediately prior to, such issue, for this Warrant.
For purposes of making any adjustment required under this Section 4(d), the
consideration received by the Company for any issue or sale of securities shall
(a) to the extent that it consists of cash be computed as the amount of cash
received by the Company without deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale, (b) to the extent that it consists of
property other than cash, be computed at the fair market value of that property
as determined in good faith by the Board of Directors, and (c) if Additional
Shares of Common Stock, Convertible Securities or right or Options are issued or
sold together with other securities or other assets of the Company for a
consideration which covers both, be computed (as provided in clauses (a) and (b)
above) as the portion of the consideration so received that may be reasonably
determined in good faith by the Board of Directors to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or Options.
If the holders of a majority-in-interest of the warrants issued pursuant to the
Purchase Agreement shall, in good faith, disagree with any determination made by
the Board of Directors of the Company of the fair market value of any property
(including without limitation any securities other than shares of Common Stock)
pursuant to the warrants issued pursuant to the Purchase Agreement (such holders
hereinafter referred to as the "Requesting Holders"), and such disagreement is
in respect of property valued by the Board of Directors of the Company at more
than $500,000, then the Requesting Holders may by written notice to the Company
(an "Appraisal Notice"), given within 15 days after notice to the holders of the
warrants issued pursuant to the Purchase Agreement following such determination,
elect to contest such determination; provided, however, that the holders of the
warrants issued pursuant to the Purchase Agreement may not seek appraisal or any
determination of fair market value to the extent that the Company has received a
fairness opinion or other appraisal from an independent appraiser selected by
the Board of Directors of the Company (including the Warrant Investor Directors,
if any) in connection with the transaction giving rise to such determination.
Within 15 days after an Appraisal Notice, the Company shall engage an Appraiser
to make an independent determination of such fair market value (the "Appraiser's
Determination"), and
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to deliver to the Company and the holder of this Warrant a report describing its
methodology and results in reasonable detail within 15 days of such engagement.
The Company and the holder of this Warrant shall be afforded reasonable
opportunities to discuss the appraisal with the Appraiser. The Appraiser's
Determination shall be final and binding on the Company and the holder of this
Warrant, absent manifest error. The costs of conducting an appraisal, including
all fees and expenses of the Appraiser, shall be borne one half by the
Requesting Holders (among the Requesting Holders, pro rata according to the
number of shares issuable upon exercise of outstanding warrants issued under the
Purchase Agreement that are held by the Requesting Holders) and one half by the
Company. "Appraiser" means an independent appraiser chosen by the Board of
Directors of the Company with the consent of the Requesting Holder with the
greatest number of Warrant Shares issuable upon exercise of the warrants issued
pursuant to the Purchase Agreement, which consent shall not be unreasonably
withheld or delayed.
For purposes of the adjustment required under this Section 4(d), if at any time
or from time to time after the Date of Grant, the Company issues or sells any
Options or Convertible Securities, then in each case the Company shall be deemed
to have issued at the time of the issuance of such Options or Convertible
Securities the maximum number of Additional Shares of Common Stock (as set forth
in the instruments relating thereto, giving effect to any provision contained
therein for a subsequent upward adjustment of such number) issuable upon
exercise or conversion thereof and to have received as consideration for the
issuance of such shares of Common Stock an amount equal to the total amount of
consideration, if any, received by the Company for the issuance of such Options
or Convertible Securities plus, in the case of such Options, the minimum amounts
of consideration, if any (as set forth in the instruments relating thereto,
giving effect to any provision contained therein for a subsequent downward
adjustment of such consideration), payable to the Company upon the exercise of
such Options and, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company upon the subsequent conversion of
any such Convertible Security (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities). No further adjustment of
the Warrant Price, adjusted upon the issuance of such Options or Convertible
Securities, shall be made as a result of the actual issuance of Additional
Shares of Common Stock on the exercise of any such Options or the conversion of
any such Convertible Securities. If any such Options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the Warrant Price adjusted upon the issuance of such Options or
Convertible Securities shall be readjusted to the Warrant Price which would have
been in effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold for the consideration received by the Company for
the granting of all such Options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.
Upon the happening of any of the following events, namely, if the purchase price
provided for in any Option, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities, or the rate at which
Convertible Securities are convertible into or exchangeable for Common Stock
shall change at any time (including, but not limited to, changes under or by
reason of provisions designed to protect against dilution), the Warrant Price in
effect at the time of such event shall forthwith be readjusted to the Warrant
Price which would have been in effect at such time had such Options or
Convertible Securities still
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outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold, but only if as a result of such adjustment the Warrant Price then in
effect hereunder is thereby reduced; and on the termination of any such Option
or any such right to convert or exchange such Convertible Securities, the
Warrant Price then in effect hereunder shall forthwith be increased to the
Warrant Price which would have been in effect at the time of such termination
had such Option or Convertible Securities, to the extent outstanding immediately
prior to such termination, never been issued.
(e) Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Shares purchasable hereunder shall be adjusted, to the
nearest whole share, to the product obtained by multiplying the number of Shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter. In no event shall any further adjustment to the Warrant
Price or number of shares issuable upon exercise of this Warrant be made
pursuant to this Section 4(e) in connection with an event resulting in an
adjustment in the Warrant Price and/or the number of Shares issuable upon
exercise of this Warrant pursuant to Sections 4(a), (b),(c) or (d) of this
Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant at such holder's last known address.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as reasonably determined in good faith
by the Company's Board of Directors.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.
(a) Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the Shares to be issued upon
exercise hereof are being acquired for investment and that such holder will not
offer, sell or otherwise dispose of this Warrant, or any Shares except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act"), or any applicable state securities laws. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
Shares so purchased are being acquired for investment and not with a view toward
distribution or resale in violation of the Act and shall confirm such other
matters related thereto as may be reasonably requested by the Company. This
Warrant and all Shares issued upon exercise of this Warrant (unless registered
under the Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
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These securities have not been registered under the Securities Act
of 1933, as amended, or any state securities laws. They may not be
sold, offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the securities
under such Act and any applicable state securities laws or pursuant
to an exemption under such laws, together with, in certain cases, an
opinion of counsel reasonably satisfactory to the Company that such
registration is not required.
Said legend shall be removed by the Company, upon the request of a holder, at
such time as the restrictions on the transfer of the applicable security shall
have terminated. In addition, in connection with the issuance of this Warrant,
the holder specifically represents to the Company by acceptance of this Warrant
as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant, and will acquire the Shares issuable upon exercise of
this Warrant, for its own account for investment purposes only and not with a
view to, or for the resale in connection with, any "distribution" thereof in
violation of the Act; provided, however, that, subject to compliance with the
terms of the Purchase Agreement, the Stockholders Agreement and applicable law,
the disposition of such holder's property shall at all times be within its
control.
(2) The holder understands that neither this Warrant nor the Shares
issuable upon exercise of this Warrant have been registered under the Act in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the holder's investment intent as
expressed herein.
(3) The holder further understands that this Warrant and the Shares
issuable upon exercise of this Warrant must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable state
securities laws, or unless exemptions from registration and qualification are
otherwise available. The holder is aware of the provisions of Rule 144,
promulgated under the Act and that the Company has no obligation to register
this Warrant under the Act or to qualify this Warrant under any applicable state
securities laws.
(4) The holder is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale or
other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, the
holder hereof agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, or other evidence reasonably satisfactory to the Company, to
the effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state securities law then in effect) of this Warrant or the Shares and
indicating whether or not under the Act certificates for this Warrant or the
Shares to be sold or
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otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law.
Upon receiving such written notice and reasonably satisfactory opinion or other
evidence, the Company, as promptly as practicable but no later than fifteen (15)
days after receipt of the written notice, shall notify such holder that such
holder may sell or otherwise dispose of this Warrant or such Shares, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 7(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly with details thereof
after such determination has been made. Notwithstanding the foregoing, this
Warrant or such Shares may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 under the Act, provided that
the Company shall have been furnished with such information as the Company may
reasonably request to provide a reasonable assurance that the provisions of Rule
144 have been satisfied. Each certificate representing this Warrant or the
Shares thus transferred (except a transfer pursuant to Rule 144 or 144A) shall
bear a legend as to the applicable restrictions on transferability in order to
ensure compliance with such laws, unless in the aforesaid opinion of counsel for
the holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer of, or grant of a security interest in, this Warrant (or the
Common Stock obtainable upon exercise thereof) or any part hereof (i) to a
partner of the holder if the holder is a partnership or to a member of the
holder if the holder is a limited liability company, (ii) to a partnership of
which the holder is a partner or a limited liability company of which the holder
is a member, or (iii) to any affiliate of the holder if the holder is a
corporation; provided, however, in any such transfer, if applicable, the
transferee shall on the Company's request agree in writing to be bound by the
terms of this Warrant as if an original holder hereof.
8. Rights as Shareholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
Notwithstanding the foregoing, the Company will transmit to the holder of this
Warrant such information, documents and reports as are generally distributed to
the holders of any class or series of the securities of the Company for which
this warrant is then exercisable concurrently with the distribution thereof to
the shareholders.
9. Registration Rights. The Company has granted registration rights to the
holder of this Warrant for the resale of the Common Stock of the Company
obtained upon exercise hereof, pursuant to the Stockholders Agreement.
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10. Additional Rights.
10.1 Notice of Corporate Action. In the event the Company proposes to: (i) pay,
distribute, or take a record of the holders of its Common Stock for the purpose
of determining the holders thereof who are entitled to receive, any dividend or
other distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of capital stock or any other securities or property, or (ii)
consummate any capital reorganization, reclassification, recapitalization,
consolidation, merger, transfer of all or substantially all of the Company's
assets, dissolution, liquidation or winding-up, or any similar transaction,
then, at least 10 days prior to the earlier of any applicable record date or
such event, as the case may be, the Company shall mail to the holder of this
Warrant a notice specifying: (a) the date or expected date on which any such
payment or distribution is to be made or record is to be taken and the amount
and character of any such dividend, distribution or right; (b) the date or
expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation,
winding-up or similar transaction is to take effect and any record date
therefor; (c) the time as of which any holders of record of shares of Common
Stock and/or any other class of securities shall be entitled to exchange their
shares of Common Stock and/or other securities for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation,
winding-up or similar transaction and a description in reasonable detail of such
transaction; and (d) in each case, the expected effect on the Warrant Price of
each such transaction or event. The Company shall update any such notice to
reflect any change in the foregoing information.
10.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the rights of the
holder under the terms of this Warrant, the holder shall have the right to
convert this Warrant or any portion thereof (the "Conversion Right") into shares
of Common Stock as provided in this Section 10.2 at any time or from time to
time during the term of this Warrant. Upon exercise of the Conversion Right with
respect to a particular number of Shares subject to this Warrant (the "Converted
Warrant Shares"), the Company shall deliver to the holder (without payment by
the holder of any exercise price or any cash or other consideration) that number
of shares of fully paid and nonassessable Common Stock as is determined
according to the following formula:
X = B - A
---------
Y
Where: X = the number of shares of Common Stock to be issued to the
holder upon such exercise
Y = the fair market value of one share of Common Stock
A = the aggregate Warrant Price of the specified number of
Converted Warrant Shares immediately prior to the exercise
of the Conversion Right (i.e., the number of Converted
Warrant Shares multiplied by the Warrant Price)
10
B = the aggregate fair market value of the specified number of
Converted Warrant Shares (i.e., the number of Converted
Warrant Shares multiplied by the fair market value of one
Converted Warrant Share)
No fractional shares shall be issuable upon exercise of the Conversion Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the holder
by the surrender of this Warrant at the principal office of the Company together
with a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2
hereto) specifying that the holder thereby intends to exercise the Conversion
Right and indicating the number of shares subject to this Warrant which are
being surrendered (referred to in Section 10.2(a) hereof as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the Shares issuable upon exercise of the
Conversion Right and, if applicable, a new Warrant evidencing the balance of the
Shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date.
(c) Determination of Fair Market Value. For purposes of this Section 10.2,
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and contingent
upon a Public Offering, and if the Company's Registration Statement relating to
such Public Offering ("Registration Statement") has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with and
contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq National
Market, the fair market value of the Common Stock shall be deemed to
be the average of the closing prices of the Common Stock on such
exchange or market over the five trading days immediately prior to
the Determination Date;
(B) If traded on the Nasdaq Stock Market (other than the Nasdaq
National Market) or other over-the-counter system, the fair market
value of the Common Stock shall be deemed
12
to be the average of the closing bid prices of the Common Stock over
the five trading days immediately prior to the Determination Date;
and
(C) If there is no public market for the Common Stock, then fair
market value shall be determined by (i) mutual agreement of the
holders of a majority-in-interest of the warrants issued pursuant to
the Purchase Agreement who are then seeking to exercise their
Conversion Rights (the "Converting Holders") and the Company or (ii)
if no such mutual agreement can be reached within 15 days, then the
higher of (a) the book value of a share of the Common Stock as
determined by a firm of independent public accountants selected
(within 10 days after the failure of the Company and the Converting
Holders to reach mutual agreement) by the Board of Directors of the
Company with the consent of the holders of the majority-in-interest
of the warrants issued pursuant to the Purchase Agreement that are
beneficially owned by Converting Holders, which consent shall not be
unreasonably withheld or delayed, as at the last day of any month
ending within 60 days preceding the date as of which the
determination is to be made (such determination of the independent
public accountant to be completed within 30 days after such
independent public accountant is chosen by the Company and the
Converting Holders) or (b) the fair value thereof determined in good
faith by an independent appraiser (chosen within 10 days after the
failure of the Company and the Converting Holders to reach mutual
agreement by the Board of Directors of the Company with the consent
of the Converting Holder exercising the Conversion Right with
respect to the greatest number of shares, which consent shall not be
unreasonably withheld or delayed) as of a date which is within 15
days of the date as of which the determination is to be made (such
determination of the independent appraiser to be completed within 30
days after such independent appraiser is chosen by the Company and
the Converting Holders). The fees and expenses of any such
independent public accountant or independent appraiser shall be
borne one half by the Converting Holders (among the Converting
Holders, pro rata according to the number of shares for which
Conversion Rights are being exercised) and one half by the Company.
If closing prices or closing bid prices are no longer reported by a securities
exchange or other trading system, the closing price or closing bid price shall
be that which is reported by such securities exchange or other trading system at
4:00 p.m. New York City time on the applicable trading day.
10.3 Exercise Prior to Expiration. To the extent this Warrant is not previously
exercised as to all of the Shares subject hereto, and if the fair market value
of one share of the Common Stock is greater than the Warrant Price then in
effect, this Warrant shall be deemed automatically exercised pursuant to Section
10.2 above (even if not surrendered) immediately before its expiration. For
purposes of such automatic exercise, the fair market value of one share of
Common Stock upon such expiration shall be determined pursuant to Section
10.2(c). To the extent this Warrant or any portion thereof is deemed
automatically exercised pursuant to this Section 10.3, the Company agrees to
promptly notify the holder hereof of the number of Shares, if any, the holder
hereof is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants to the
holder of this Warrant as follows:
12
(a) This Warrant has been duly authorized and executed by the Company and
is a valid and binding obligation of the Company enforceable in accordance with
its terms, subject to laws relating to bankruptcy, insolvency, the relief of
debtors or creditors' rights generally and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been duly authorized and reserved for issuance by the
Company as of the Date of Grant and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable;
(c) The execution and delivery of this Warrant as of the Date of Grant, and
the issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof (i) are not and will not be, inconsistent with the Company's
certificate of incorporation or by-laws, (ii) assuming the holder's
representations to the Company set forth in Section 7(a) are true and complete,
do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, (iii) do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound, and (iv) assuming the holder's representations to
the Company set forth in Section 7(a) are true and complete, do not and will not
require the consent or approval of, the giving of notice to, the registration or
filing with or the taking of any action in respect of or by, any Federal, state
or local government authority or agency or other person, except for the filing
of notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby; and
(d) As of the Date of Grant, there are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a
material adverse effect on the ability of the Company to perform its obligations
under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document required
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to each such holder at its address as shown on the books of the Company or to
the Company at the address indicated therefor on the signature page of this
Warrant with a copy to the General Counsel at the same address and with another
copy to Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxxx, XX 00000,
Attention: Xxxx X. Xxxxxxx, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger or consolidation and all of the
obligations of the Company relating to the Shares issuable upon the exercise or
conversion of this Warrant shall survive the
13
exercise, conversion and termination of this Warrant and all
of the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
certificate of incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
21. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
14
23. Entire Agreement; Modification. This Warrant and the Purchase Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and undertakings of the parties, whether oral or written, with
respect to such subject matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its
corporate name by its duly authorized officer and to be dated as of the Date of
Grant set forth on the first page to this Warrant.
XXX.XXX, INC.
By:
----------------------------------------
Name:
Title:
Address: 000 Xxxx Xxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
[SIGNATURE PAGE TO WARRANT]
EXHIBIT A-1
NOTICE OF EXERCISE
TO: XXX.XXX, INC. (THE "COMPANY")
1. The undersigned hereby:
|_| elects to purchase shares of Common Stock of the Company pursuant to the
terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full, or
|_| *elects to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to shares of Common Stock.
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:
--------------------------------------
(Name)
--------------------------------------
--------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.
--------------------------------------
(Signature)
-----------------------
(Date)
A-2
EXHIBIT A-2
NOTICE OF EXERCISE
TO: XXX.XXX, INC. (THE "COMPANY")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S, (File No. ______________) which was filed with the
Securities and Exchange Commission on ____________, 20__, the undersigned
hereby:
|_| elects to purchase ___ shares of Common Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at
the Closing) pursuant to the terms of the attached Warrant, or
|_| elects to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to Shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such shares.
3. The undersigned has instructed the custodian for the selling shareholders to
deliver to the Company $ or, if less, the net proceeds due the undersigned from
the sale of shares in the aforesaid public offering. If such net proceeds are
less than the purchase price for such shares, the undersigned agrees to deliver
the difference to the Company prior to the Closing.
--------------------------------------
(Name)
--------------------------------------
(Address)
----------------------
(Date)
A-3
