THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
APPLICABLE STATE LAW. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE LAW.
No. DMG-2
WARRANT FOR THE PURCHASE OF
258,449 SHARES OF COMMON STOCK
OF
WIZZARD SOFTWARE CORPORATION
(A Delaware Corporation)
Wizzard Software Corporation, a Delaware corporation (the "Company"),
hereby certifies that DMG, Inc., or its registered permitted assigns (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time or from time to time during the period
commencing on January 1, 2001 and ending on the December 31, 2003 (the
"Exercise Period"), 258,449 shares of Common Stock, $.001 par value, of the
Company (the "Common Stock"), at a purchase price equal to $1.50 per share.
The number of shares of Common Stock purchasable upon exercise of this
Warrant, and the purchase price per share, as adjusted pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant
Stock" and the "Purchase Price", respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, only
during the Exercise Period, in whole or in part, by surrendering this Warrant,
with the purchase form appended hereto as Exhibit A duly executed by such
Registered Holder, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full,
in lawful money of the United States, of the Purchase Price payable in respect
of the number of shares of Warrant Stock purchased upon such exercise. This
Warrant shall be vested on the date hereof.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which the
Warrant shall have been surrendered to the Company as provided in Subsection
1(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise as
provided in Subsection 1(c) below shall be deemed to have become the holder or
holders of record of the Warrant Stock represented by such certificates.
(c) As soon as practicable after the exercise of this Warrant in
full or in part, and in any event within three (3) business days thereafter,
the Company at its expense will cause to be issued in the name of, and
delivered to, the Registered Holder, or, subject to the terms and conditions
hereof, as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full
shares of Warrant Stock to which such Registered Holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such Registered
Holder would otherwise be entitled, cash in an amount determined pursuant to
Section 3 hereof; and
(ii) in case such exercise is in part only, a new Warrant
or Warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of shares of Warrant Stock equal
(without giving effect to any adjustment therein) to the number of such shares
called for on the face of this Warrant, less the number of such shares of
Warrant Stock purchased by the Registered Holder upon such exercise as
provided in Subsection 1(a) above.
(d) Unless registered under the Securities Act of 1933, as
amended (the "Act"), each certificate for Warrant Stock purchased upon
exercise of this Warrant shall bear a legend as follows, unless the Warrant
Stock has been registered under the Act:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended (the "Act"), or applicable state law. The
securities may not be offered for sale, sold or
otherwise transferred except pursuant to an effective
registration statement under the Act, or pursuant to
an exemption from registration under the Act and
applicable state law."
2. Adjustments.
(a) If the outstanding shares of the Company's Common Stock
shall be subdivided or split into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If the outstanding shares of Common Stock shall be combined or reverse-split
into a smaller number of shares, the Purchase Price in effect immediately
prior to such combination shall, simultaneously with the effectiveness of such
combination, be proportionately increased. When any adjustment is required to
be made in the Purchase Price, the number of shares of Warrant Stock
purchasable upon the exercise of this Warrant shall be changed to the number
determined by dividing (i) an amount equal to the number of shares issuable
upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par
value or a subdivision or combination as provided for in Subsection 2(a)
above), or any consolidation or merger of the Company with or into another
corporation, or a transfer of all or substantially all of the assets of the
Company, or the payment of a liquidating distribution, then, as part of any
such reorganization, reclassification, consolidation, merger, sale or
liquidating distribution, lawful provision shall be made so that the
Registered Holder of this Warrant shall have the right thereafter to receive
upon the exercise hereof (to the extent, if any, still exercisable) the kind
and amount of shares of stock or other securities or property which such
Registered Holder would have been entitled to receive if, immediately prior to
any such reorganization, reclassification, consolidation, merger, sale or
liquidating distribution, as the case may be, such Registered Holder had held
the number of shares of Warrant Stock which were then purchasable upon the
exercise of this Warrant. In any such case, appropriate adjustment (as
reasonably determined by the Board of Directors of the Company) shall be made
in the application of the provisions set forth herein with respect to the
rights and interests thereafter of the Registered Holder of this Warrant such
that the provisions set forth in this Section 2 (including provisions with
respect to adjustment of the Purchase Price) shall thereafter be applicable,
as nearly as practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this
Warrant.
(c) No adjustment in the per share Purchase Price shall be
required unless such adjustment would require an increase or decrease in the
Purchase Price of at least $0.01; provided, however, that any adjustments
which by reason of this paragraph are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 2 shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be. Anything in this Section 2 to the
contrary notwithstanding, the Company shall be entitled to make such
reductions in the per share Purchase Price, in addition to those required by
this Section 2 as in its discretion it shall deem to be advisable in order
that any stock dividend, subdivision of shares or distribution rights to
purchase stock or securities convertible or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.
(d) Upon the happening of any event requiring an adjustment of
the Purchase Price hereunder, the Company shall forthwith give written notice
thereto to the Registered Holder of this Warrant stating the adjusted Purchase
Price and the adjusted number of shares of Warrant Stock purchasable upon the
exercise hereof resulting from such event and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(e) The Company will not, through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution,
issuance or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Warrant.
3. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the mean between the low bid and
high asked prices for the Warrant Stock on the over-the-counter market as
reported by the listed market makers in the Common Stock on the trading day
immediately prior to the date of exercise, or if this is not applicable, then
on the basis of the then market value of the Warrant Stock as shall be
reasonably determined by the Board of Directors of the Company.
4. Certain Dividends. It is within the sole discretion of the Board
of Directors of the Company to determine whether a dividend or distribution
shall be paid. In any event, the Company shall not pay a dividend or make a
distribution on the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally accepted
accounting principles) except for a stock dividend payable in shares of Common
Stock.
5. Notices of Record Date, etc. In case:
(a) the Company shall take a record of the holders of its Common
Stock (or other securities at the time issuable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution (other than a dividend or distribution payable solely in
capital stock of the Company or out of funds legally available therefor), or
to receive any right to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, and in each case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, and (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock (or such
other stock or securities as are at the time issuable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
ten (10) days prior to the record date or effective date, for the event
specified in such notice, provided that the failure to mail such notice shall
not affect the legality or validity of any such action.
6. Outstanding Stock; Reservation of Stock. The Company represents
and warrants to the Registered Holder that, as of the date hereof, 13,602,539
shares of Common Stock are issued and outstanding. The Company will at all
times reserve and keep available, solely for issuance and delivery upon the
exercise of this Warrant, such number of shares of Warrant Stock and other
stock, securities and property, as from time to time shall be issuable upon
the exercise of this Warrant.
7. Replacement of Warrants. 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 loss, theft or
destruction, upon delivery of an indemnity agreement (with surety if
reasonably required) reasonably satisfactory to the Company, or in the case of
mutilation, upon surrender and cancellation of this Warrant or such stock
certificate, the Company will issue, in lieu thereof, a new Warrant or stock
certificate, as the case may be, of like tenor.
8. Registration Rights.
8.1 "Piggy-Back" Registration.
8.1.1 Grant of Right. The Registered Holder of this Warrant shall
have the right to include all or any portion of this Warrant requested by the
Registered Holder and all of the securities underlying such Warrant, including
the Warrant Stock underlying this Warrant (collectively, the "Registrable
Securities"), as part of any registration of Common Stock filed by the Company
pursuant to the Act (other than in connection with a transaction contemplated
by Rule 145(a) promulgated under the Act or pursuant to Form S-8); provided
that this Warrant is exercised prior to the closing of such registration.
8.1.2 Terms. The Company shall bear all fees and expenses attendant
upon registering the Registrable Securities, but the Registered Holder shall
pay any and all underwriting commissions and the expenses of any legal counsel
selected by the Registered Holder to represent it in connection with the sale
of the Registrable Securities. In the event of such a proposed registration,
the Company shall furnish the Registered Holder of outstanding Registrable
Securities with not less than thirty (30) days' written notice thereof prior
to the proposed date of filing of such registration statement. Such notice to
the Registered Holder shall continue to be given for each registration
statement filed by the Company until such time as all of the Registrable
Securities have been sold by the Registered Holder. The Registered Holder of
the Registrable Securities shall exercise the "piggy-back" rights provided for
herein by giving written notice, within twenty (20) days of the receipt of the
Company's notice of its intention to file a registration statement. The
Company shall have the absolute right to withdraw or cease to prepare or file
any registration statement for any offering referred to in this Section 8
without any obligation or liability to any Registered Holder.
8.1.3 Reduction in Registration Rights. If any underwriter advises
the Company in writing that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would materially and
adversely affect such offering, or the timing thereof, then the Company will
include in such registration, to the extent of the amount and class which the
Company is so advised can be sold without such material and adverse affect in
such offering;
(a) First, all securities proposed to be sold by the Company for
its own account;
(b) Second, the Registrable Securities requested to be included
in such registration by Registered Holders pursuant to this Section 8 and all
other securities being registered pursuant to the exercise of contractual
rights comparable to the rights granted in this Section 8, pro rata based on
the estimated gross proceeds from the sale thereof; and
(c) Third, all other securities requested to be included in the
registration.
8.1.4 Limitations. Each Registered Holder shall be entitled to have
its Registrable Securities included in up to three (3) piggy-back
registrations pursuant to this Section 8, provided that, if all of the
Registrable Securities are not registered due to the provisions of Section
8.1.3 hereof, then the limitations contained herein shall not be effective.
8.2 General Terms.
8.2.1 Indemnification.
(a) The Company shall indemnify the Registered Holder of the
Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Registered Holder within
the meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against all loss,
claim, damage, expense or liability (including all reasonable attorneys' fees
and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become
subject caused by any untrue or alleged untrue statement of a material fact
contained in such registration statement or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except as and to the extent to which the
Registered Holder may be obliged to indemnify the Company as provided in
Paragraph (b) hereof.
(b) The Registered Holder of the Registrable Securities to be
sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company against all
loss, claim, damage, expense or liability (including all reasonable attorneys'
fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from information furnished by
or on behalf of such Registered Holder, or their successors or assigns, in
writing, for specific inclusion in such registration statement or from the
failure to provide such information.
8.2.2 Documents Delivered to Registered Holder. The Company shall use
reasonable efforts to furnish to each Registered Holder participating in any
of the foregoing offerings and to each underwriter of any such offering, if
any, a signed counterpart, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a "cold
comfort" letter dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering, a letter dated
the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in, and in the customary form
of, opinions of issuer's counsel and accountants' letters delivered to
underwriters in underwritten public offerings of securities. The Company shall
also deliver promptly to each Registered Holder participating in the offering
requesting the correspondence and memoranda described below and to the
managing underwriter copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement
and permit each Registered Holder and underwriter to do such investigation,
upon reasonable advance notice, with respect to information contained in or
omitted from the registration statement as it deems reasonably necessary to
comply with applicable securities laws or rules of the National Association of
Securities Dealers, Inc.. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Registered Holder
shall reasonably request.
8.2.3 Documents to be Delivered by the Registered Holder. Each of
the Registered Holder(s) participating in any of the foregoing offerings shall
furnish to the Company a completed and executed questionnaire provided by the
Company requesting information and such other documents as are customarily
sought of selling security holders.
9. Transfers, etc.
(a) This Warrant may not be assigned by the Registered Holder
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. This Warrant shall be binding upon and
inure to the benefit of and shall be enforceable by the Registered Holder and
the Company and their respective successors and permitted assigns.
(b) The Company will maintain a register (the "Warrant
Register") containing the name and address of the Registered Holder of this
Warrant. The Registered Holder may change its, his or her address as shown on
the Warrant Register by written notice to the Company requesting such change.
(c) Until any transfer of this Warrant is made in the Warrant
Register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when
this Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
10. Stock Transfer Restrictions. Notwithstanding anything to the
contrary contained herein, any exercise of this Warrant shall not be effective
and the Company shall not issue any shares of Warrant Stock unless and until
all persons to whom certificates for Warrant Stock shall be issuable upon
exercise of this Warrant shall have executed and delivered to the Company a
Stock Transfer Restriction Agreement or similar agreement required by the
Company (the "Transfer Restriction Agreement"). All of the Warrant Stock
shall be held subject to all of the restrictions, terms and conditions set
forth in the Transfer Restriction Agreement. Each stock certificate for
Warrant Stock shall bear such restrictive endorsements as may be appropriate,
including without limitation, those required by the Transfer Restriction
Agreement.
11. Mailing of Notices, etc. All notices and other communications
from the Company to the Registered Holder of this Warrant shall be mailed by
first-class certified or registered mail, postage prepaid, sent by reputable
overnight delivery or by facsimile to the address furnished to the Company in
writing by the last Registered Holder of this Warrant who shall have furnished
an address to the Company in writing. All notices and other communications
from the Registered Holder of this Warrant or in connection herewith to the
Company shall be mailed by first-class certified or registered mail, postage
prepaid, sent by reputable overnight delivery or by facsimile to the Company
at its offices at Wizzard Software, Inc., 000 Xxxx Xxx, Xxxxxxxxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxxx, President, or to such other address as the
Company shall so notify the Registered Holder.
12. No Rights as Stockholders. Until the exercise of this Warrant,
the Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company, except as otherwise provided
herein.
13. Change or Waiver. Any term of this Warrant may be changed or
waived only by an instrument in writing signed by the party against whom
enforcement of the change or waiver is sought.
14. Headings. The headings of this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
15. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of law.
16. Venue. The Company (a) agrees that any legal suit, action or
proceeding arising out of or relating to this Warrant shall be instituted
exclusively in Delaware Chancery Court or any federal court located in the
State of Delaware, (b) waives any objection to the venue of any such suit,
action or proceeding and the right to assert that such forum is not a
convenient forum, and (c) irrevocably consents to the jurisdiction of the
Delaware Chancery Court and any federal court located in the State of Delaware
in any such suit, action or proceeding. The Company further agrees to accept
and acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the Delaware Chancery Court or any federal court
located in the State of Delaware and agrees that service of process upon it
mailed by certified mail to its address shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding.
17. Cancellation of Warrant No. DMG-1 and Issuance of Replacement
Warrants Nos. DMG-2 and MLM-1. The Company acknowledges that it was unaware
on August 10, 2000 that Xxxx X. Xxxxxxxx ("MLM"), who was then performing
services for the Company, was performing those services for his own benefit
and his own account, rather than on behalf of the Registered Holder, which was
also then performing services for the Company. In connection therewith, the
Company also acknowledges that Warrant No. DMG-1, issued by the Company on
August 10, 2000 in favor of the Registered Holder for the purchase of 408,076
shares of Common Stock of the Company, was issued to the Registered Holder in
error. Such error (the "Error") has been brought to the attention of the
Registered Holder and MLM, and the Company, the Registered Holder and MLM
desire to correct the Error. Therefore, Warrant No. DMG-1 is hereby cancelled
and that this Warrant No. DMG-2 for the purchase of 258,449 shares of Common
Stock of the Company and Warrant No. MLM-1 for the purchase of 149,627 shares
of Common Stock of the Company (such Warrants DMG-2 and MLM-1 being for the
purchase of an aggregate of 408,076 shares of Common Stock of the Company and
are referred to as the "Corrected Warrants") are simultaneously being issued
to the Registered Holder and MLM, respectively, effective as of August 10,
2000 to correct the Error, and the Corrected Warrants hereby supersede and
replace Warrant No. DMG-1 in its entirety. The Company acknowledges receipt
from the Registered Holder of executed Warrant No. DMG-1 for cancellation.
Effective Date: August 10, 2000
WIZZARD SOFTWARE CORPORATION
By:/s/Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President
DMG, INC.
By:
Name:
Title:
EXHIBIT A
PURCHASE FORM
To: Wizzard Software Corporation
000 Xxxx Xxx
Xxxxxxxxxx, XX 00000
Dated: _______, 200__
In accordance with the provisions set forth in the attached Warrant (No.
__), the undersigned hereby irrevocably elects to purchase __________ shares
of the Common Stock covered by such Warrant and herewith makes payment of
$____________, representing the full purchase price for such shares at the
price per share provided for in such Warrant.
The undersigned understands that the shares have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
other jurisdiction.
By:
Name:
Title:
