EXHIBIT 10.4
WARRANT NO. SERIES A 002
NEXT LEVEL COMMUNICATIONS, INC.
COMMON STOCK PURCHASE WARRANT
For good and valuable consideration, NEXT LEVEL COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), hereby grants to MOTOROLA, INC., a
Delaware Corporation (the "Warrantholder"), the right to subscribe for and
purchase from the Company Three Million Four Hundred Fifty Six Thousand Two
Hundred Twenty One (3,456,221) validly issued, fully paid and nonassessable
shares (the "Warrant Shares") of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), at the purchase price per share (the per share
"Exercise Price") identified below, at any time prior to 5:00 p.m., New York
City time on the expiration date identified below (the "Expiration Date"), all
subject to the terms, conditions and adjustments herein set forth.
1. Exercise of Warrant
1.1. Exercise. Subject to the terms and conditions set forth
herein, this Warrant may be exercised, in whole or in part and at any time or
from time to time, during normal business hours on any Business Day (as
hereinafter defined) on or prior to the Expiration Date by the Warrantholder by:
(a) the surrender of this Warrant to the Company, with a
duly executed Exercise Form (in the form attached hereto as Exhibit A)
specifying the number of Warrant Shares to be purchased; and
(b) tender to the Company (and delivery for the account of
the Company upon receipt from the Company of appropriate wiring instructions) of
the aggregate Exercise Price for the number of Warrant Shares specified in the
Exercise Form in immediately available funds in lawful money of the United
States of America.
As used herein, "Business Day" means any day other than a Saturday, Sunday or a
day on which national banks are authorized by law to close in the State of New
York or California.
1.2. Warrant Shares Certificate. A stock certificate or
certificates for the Warrant Shares for which this Warrant is exercised shall be
delivered to the Warrantholder promptly after any exercise under Section 1.1
hereof. If this Warrant shall have been exercised only in part, the Company
shall, immediately after receipt of this Warrant, deliver to the Warrantholder a
new Warrant evidencing the rights to purchase the remaining Warrant Shares,
which new Warrant shall in all other respects be identical with this Warrant.
1.3. Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes that may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
1.4. Exercise Price. Subject to adjustment as provided in Section
6.1 or 6.2 hereof, the per share "Exercise Price" is Two Dollars and Sixty Cents
($2.60).
1.5. Expiration Date. The expiration date of this Warrant shall
be, and the term "Expiration Date" means, February 19, 2007.
2. Transfers and Exchanges
2.1. Restrictions on Transfer of Warrants or Shares
(a) Neither this Warrant not any warrant issued in
substitution for all or any part of this Warrant may be sold, transferred, or
otherwise disposed of for value, in whole or in part, except to a successor to
all or a substantial part of the business of Warrantholder. Subject to the
foregoing provisions, this Warrant may be exchanged at the option of the
Warrantholder, when surrendered to the Company at its office, for another
Warrant or other Warrants of the like tenor and representing in the aggregate a
like number of Warrant Shares.
(b) The Warrant Shares shall not be transferable until the
thirty-sixth (36th) day after the Warrant exercise pursuant to which such
respective Warrant Shares shall have been issued.
2.2. Restrictive Legends
(a) Each warrant issued in substitution for all or part of
this Warrant shall be stamped or otherwise imprinted with a legend appropriately
referring to the foregoing restriction on transfer of the Warrants.
(b) Except as otherwise permitted by this Section 2.2, each
stock certificate for Warrant Shares issued upon the exercise of any Warrant and
each stock certificate issued upon the direct or indirect transfer of any such
Warrant Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
THAT, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
(c) Notwithstanding the foregoing, the Warrantholder may
require the Company to issue a stock certificate for Warrant Shares without such
legend if such Warrant Shares have been registered for resale under the
Securities Act of 1933 or the removal of such legend is otherwise appropriate
under that Act and the rules and regulations thereunder.
3. Reservation and Registration of Shares, Etc. The Company covenants
and agrees as follows:
2
3.1. All Warrant Shares that are issued upon the exercise of this
Warrant will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free from all taxes, liens, security interests, charges, and
other encumbrances imposed by or through the Company with respect to the
issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
3.2. During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant and all other outstanding warrants.
4. Loss or Destruction of Warrant. Subject to the terms and conditions
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor.
5. Ownership of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of
transfer.
6. Certain Adjustments
6.1. Adjustments to Number of Warrant Shares. The number of
Warrant Shares purchasable upon the exercise of this Warrant and the per share
Exercise Price shall be subject to adjustment after the date hereof as follows:
(a) Stock Dividends. If at any time after the date of this
Warrant (set forth on the signature page hereof) (i) the Company shall declare
or pay a stock dividend payable in shares of Common Stock or (ii) the number of
shares of Common Stock shall have been increased by a subdivision or split-up of
shares of Common Stock, then, on the date of the declaration or payment of such
dividend or immediately after the effective date of subdivision or split-up, as
the case may be, the number of shares to be delivered upon exercise of this
Warrant will be increased so that the Warrantholder will be entitled to receive
the number of shares of Common Stock that such Warrantholder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto, and the per share Exercise Price will be adjusted as provided
below in paragraph 6.2.
(b) Combination of Stock. If at any time after the date of
this Warrant the number of shares of Common Stock outstanding shall have been
decreased by a combination of the outstanding shares of Common Stock (including
a reverse stock-split), then, immediately after the effective date of such
combination, the number of shares of Common Stock to be delivered upon exercise
of this Warrant will be decreased so that the Warrantholder thereafter will be
entitled to receive the number of shares of Common Stock that such Warrantholder
would have owned immediately following such action had this Warrant been
exercised
3
immediately prior thereto, and the per share Exercise Price will be adjusted as
provided below in paragraph 6.2.
(c) Reorganization, etc. If at any time after the date of
this Warrant any capital reorganization of the Company, or any reclassification
of the Common Stock, or any consolidation of the Company with or merger of the
Company with or into any other person, shall be effected in such a way that the
holders of Common Stock shall be entitled to receive stock, other securities
and/or assets (whether such stock, other securities and/or assets are issued or
distributed by the Company or another person) with respect to or in exchange for
Common Stock, then, upon exercise of this Warrant the Warrantholder shall have
the right to receive the kind and amount of stock, other securities and/or
assets receivable upon such reorganization, reclassification, consolidation or
merger by a holder of the number of shares of Common Stock that such
Warrantholder would have been entitled to receive upon exercise of this Warrant
had this Warrant been exercised immediately before such reorganization,
reclassification, consolidation or merger. The Company shall not effect any such
capital reorganization, reclassification of the Common Stock, or consolidation
or merger of the Company with or into any other person, unless prior to or
simultaneously with the consummation thereof, the successor entity (if other
than the Company) resulting from such reorganization, reclassification
consolidation or merger shall assume by written instrument executed and
delivered to Warrantholder, the obligation to deliver to Warrantholder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, Warrantholder may be entitled to receive. In the event of such an
adjustment, the per share Exercise Price shall be adjusted, if necessary, so
that the aggregate Exercise Price for exercise of this Warrant in full will be
unchanged.
(d) Stock and Rights Offering at Less than Fair Market Value
(i) If at any time after the date of this Warrant
the Company shall issue to the holders of its Common Stock, or sell or fix a
record date for the issuance or sale to the holders of its Common Stock, or
grant to the holders of its Common Stock rights to purchase, additional shares
of its Common Stock without consideration or at a price per share that is less
than Fair Market Value per share of Common Stock (as defined in Section 7.1
hereof) on the date of such issuance or such record date then, immediately after
the date of such issuance or sale or on such record date, the number of shares
of Common Stock to be delivered upon exercise of this Warrant shall be increased
so that the Warrantholder thereafter will be entitled to receive the number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock such Warrantholder would have been entitled to receive immediately before
the date of such issuance or sale or such record date by a fraction, the
denominator of which will be the number of shares of Common Stock outstanding on
such date plus the number of shares of Common Stock that the aggregate offering
price of the total number of shares so offered for subscription or purchase
would purchase at such Fair Market Value, and the numerator of which will be the
number of shares of Common Stock outstanding on such date plus the number of
additional shares of Common Stock offered for subscription or purchase, and the
per share Exercise Price shall be adjusted as provided below in paragraph 6.2.
(ii) If at any time after the date of this Warrant
the Company shall distribute to all holders of its Common Stock any shares of
capital stock of the Company (other than Common Stock) or evidences of its
indebtedness or assets (excluding cash dividends or distributions paid from
retained earnings of the Company) or rights or warrants to subscribe
4
for or purchase any of its securities (any of the foregoing being hereinafter in
this paragraph (d)(ii) called the "Securities"), other than pursuant to a
reorganization, reclassification, consolidation or merger described in paragraph
(c), then in each such case, unless the Company elects to reserve shares or
other units of such Securities for distribution to the Warrantholder upon
exercise of the Warrants of such Warrantholder so that, in addition to the
shares of the Common Stock to which such Warrantholder is entitled, such
Warrantholder will receive upon such exercise the amount and kind of such
Securities that such Warrantholder would have received if the Warrantholder had,
immediately prior to the record date for the distribution of the Securities,
exercised the Warrant, then the number of shares of Common Stock to be delivered
to such Warrantholder upon exercise of this Warrant shall be increased so that
the Warrantholder thereafter shall be entitled to receive the number of shares
of Common Stock determined by multiplying the number of shares such
Warrantholder would have been entitled to receive immediately before such record
date, had the Warrantholder exercised the Warrant immediately prior thereto by a
fraction, the denominator of which shall be the Fair Market Value per share of
Common Stock on such record date minus the then fair market value (as reasonably
determined by the Board of Directors of the Company), of the portion of the
capital stock or assets or evidences of indebtedness so distributed or of such
rights or warrants applicable to one share of Common Stock and the numerator of
which shall be the Fair Market Value per share of the Common Stock, and the per
share Exercise Price shall be adjusted as provided below in paragraph 6.2.
(iii) For the purpose of making any adjustment
required under this Section 6.1(d), the consideration received by the Company
for any issue or sale of securities shall (a) to the extent it consists of cash
be computed as the gross amount of cash received by the Company before deduction
of any expenses payable by the Company and any underwriting or similar
commissions, discounts, compensation or concessions paid or allowed by the
Company in connection with such issue or sale, (b) to the extent it consists of
property other than cash, be computed at the fair value of that property as
reasonably determined in good faith by the Board of Directors and (c) if
additional shares of Common Stock, securities convertible into Common Stock or
rights or options to purchase either additional shares of Common Stock or such
convertible securities or are issued or sold together with other stock or
securities or other assets of the Company for a consideration which covers both,
be computed 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, such convertible securities or rights or
options.
(e) Fractional Shares. No fractional shares of Common Stock
or scrip shall be issued to any Warrantholder in connection with the exercise of
this Warrant. Instead of any fractional shares of Common Stock that would
otherwise be issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment in respect of such fractional interest in an
amount equal to that fractional interest of the Fair Market Value per share of
Common Stock as of the close of business on the Business Day immediately
preceding the exercise of the Warrant.
(f) Xxxxxxxxx. Notwithstanding any other provision of this
Section 6.1, no adjustment shall be made to the number of shares of Common Stock
to be delivered to the Warrantholder (or to the per share Exercise Price) if
such adjustment represents less than 1% of the number of shares to be so
delivered, but any lesser adjustment shall be carried forward and
5
shall be made at the time and together with the next subsequent adjustment that
together with any adjustments so carried forward shall amount to 1% or more of
the number of shares to be so delivered.
6.2. Exercise Price Adjustment. Except in cases where an
adjustment of the per share Exercise Price is provided for above, whenever the
number of Warrant Shares purchasable upon the exercise of the Warrant becomes
subject to adjustment as provided pursuant to this Section 6, the per share
Exercise Price payable upon the exercise of this Warrant shall be adjusted by
multiplying such per share Exercise Price immediately prior to such adjustment
by a fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
purchasable immediately thereafter; provided, however, that the per share
Exercise Price shall in no event be less than the par value of such Warrant
Share.
6.3. No Dilution or Impairment
(a) If any event shall occur as to which the provisions of
Section 6.1 are not strictly applicable but the failure to make any adjustment
would adversely affect the purchase rights represented by the Warrants contrary
to the essential intent and principles of such Section, then, in each such case,
appropriate adjustments shall be made so as to preserve those rights without
dilution but also without enlargement.
(b) The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in reasonable 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 Warrantholders against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (1) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from time
to time outstanding and (2) will not take any action that would result in an
adjustment of the number of Warrant Shares issuable upon exercise of this
Warrant in full or of the per share Exercise Price if the total number of
Warrant Shares issuable after the action upon the exercise of all of the
Warrants in full would exceed the total number of shares of Common Stock then
authorized by the Company's certificate of incorporation and available for the
purposes of issue upon such exercise.
(c) The parties agree that the provisions of Section 6.1
shall be interpreted and applied so that there shall not be multiple
adjustments, under different subsections of Section 6.1, of the per share
Exercise Price and number of Warrant Shares issuable upon exercise of this
Warrant in full with respect to a single dilutive event, in a fashion that would
"double-count" such dilutive event.
6.4. Notice of Adjustment. Whenever the number of Warrant Shares
or the per share Exercise Price is adjusted, as herein provided, the Company
shall promptly send to the Warrantholder a notice of such adjustment or
adjustments setting forth the effective date(s)
6
thereof, the number of Warrant Shares and the per share Exercise Price in effect
prior to and after such adjustment(s), a brief statement of the facts requiring
such adjustment(s) and the computation by which such adjustment(s) was (were)
made.
7. Miscellaneous
7.1. The "Fair Market Value" of a share of Common Stock as of a
particular date (the "Determination Date") shall mean the average of the Daily
Sales Prices (as defined below) of the Common Stock on the primary securities
exchange or market on which it is listed or traded on the last 20 Business Days
prior to the Determination Date. The "Daily Sales Price" shall be the closing
price for bona fide transactions of the Common Stock at the end of each day or,
if no such transaction takes place that day, the average of the closing bid and
asked prices for such day. If the Common Stock was, but is no longer listed or
traded on a primary securities exchange or market, then the Board of Directors
of Motorola, Inc. (or a duly constituted committee thereof) shall determine in
good faith the Fair Market Value of the Common Stock on the basis of such
quotations, appraisals and/or evaluations as it considers appropriate. As used
in this paragraph, a primary securities exchange or market includes national
securities exchanges registered under the Securities Exchange Act of 1934, as
amended, the Nasdaq Stock Market National Market, and any successor to the
foregoing. If the Common Stock is listed or traded on more than one primary
securities exchange or market, the Fair Market Value shall be determined on the
basis of the exchange or market on which the largest volume of shares of the
Common Stock is traded during the period in question.
7.2. Binding Effect; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and their
respective successors and permitted assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company
and the Warrantholder or their respective successors or assigns any rights,
remedies, obligations or liabilities under or by reason of this Warrant.
7.3. Amendments. Any provision of this Warrant may be amended and
the observance thereof waived only with the written consent of the Company and
the Warrantholder.
7.4. Section and Other Headings. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
7.5. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally
(including by commercial courier service), telecopied (with machine confirmation
and hard copy following by mail or personal delivery) or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally or when so telecopied, or three days after
being sent by certified, registered or express mail, as follows:
7
- if to the Company to:
Next Level Communications, Inc.
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Chief Financial Officer
Telecopy No. (000) 000-0000
- or if to the Warrantholder to:
Motorola, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Treasurer
Telecopy No. (000) 000-0000.
Any party may by notice given in accordance with this Section designate another
address or person for receipt of notices hereunder.
7.6. Severability. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
7.7. Governing Law; Consent to Jurisdiction. This Warrant shall
be deemed to be a contract made under the laws of the State of New York. Each of
the Company and the Warrantholder hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this Warrant.
Each of the Company and the Warrantholder irrevocably waives, to the fullest
extent permitted by applicable law, any objection that each may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
7.8. Counterparts; Execution. This Warrant may be executed,
issued, and delivered in counterparts, each of which shall be an original
instrument but both of which, taken together, shall be one and the same Warrant.
This Warrant may be executed, issued, and delivered by facsimile.
7.9. No Rights or Liabilities as Stockholder. Nothing contained
in this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
8
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
NEXT LEVEL COMMUNICATIONS, INC.
By: /s/ Next Level Communications, Inc.
---------------------------------------
Name:
-------------------------------------
(Please print)
Title: Senior Vice President
------------------------------------
Dated: February 20, 2002
Acknowledged and Agreed:
MOTOROLA, INC.
By: /s/ Motorola, Inc.
--------------------------------
Name:
--------------------------------
(Please print)
Title: Senior Vice President
--------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS. IN ADDITION TO THE OTHER RESTRICTIONS ON TRANSFER SET
FORTH HEREIN, NEITHER THIS WARRANT NOR THOSE SECURITIES, NOR ANY INTEREST
THEREIN, MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS THAT, IN THE
OPINION OF COUNSEL FOR THE WARRANTHOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
Exhibit A
EXERCISE FORM
(To be executed upon exercise of the attached Warrant)
The undersigned Holder hereby exercises the right, represented by this Warrant,
to purchase ______________ of the Warrant Shares and herewith tenders payment
for such Warrant Shares to the order of Next Level Communications, Inc. in the
amount of $________________.
The undersigned requests that a certificate for the Warrant Shares resulting
from the above exercise be registered in the name of the undersigned and that
such certificates be delivered to the undersigned's address below. The
undersigned represents that it is acquiring such Warrant Shares for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control).
Dated: __________________, 200__
Holder: By:
------------------------------------ ------------------------------------------
(Please print) (Signature of Holder if Holder is an
individual or of authorized representative
if Holder is an entity)
--------------------------------------------
(Street Address of Holder)
--------------------------------------------
(Print signer's name and title if Holder
is an entity)
--------------------------------------------
(City) (State) (Zip Code)
