Exhibit 10.2
XA, INC.
WARRANT AGREEMENT
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Date: Effective November 2, 2006
To Whom It May Concern:
XA, INC. (the "Company"), for value received, hereby agrees to issue common
stock purchase warrants entitling Xxxxx X. Xxxx, Attorney at Law, an individual
("Holder") and his assigns to purchase an aggregate of 75,000 shares of the
Company's common stock ("Common Stock"). Such warrant is evidenced by a warrant
certificate in the form attached hereto as Schedule 1 (such instrument being
hereinafter referred to as a "Warrant," and such Warrant and all instruments
hereafter issued in replacement, substitution, combination or subdivision
thereof being hereinafter collectively referred to as the "Warrant"). The
Warrant is issued in connection with a Debt Conversion Agreement entered into
between the Company and the Holder. The number of shares of Common Stock
purchasable upon exercise of the Warrant is subject to adjustment as provided in
Section 5 below. The Warrant will be exercisable by the Warrant Holder (as
defined below) as to all or any lesser number of shares of Common Stock covered
thereby, at an initial purchase price of US $0.30 per share (the "Purchase
Price"), subject to adjustment as provided in Section 5 below, for the exercise
period defined in Section 3(a) below. The term "Warrant Holder" refers to the
person whose name appears on the signature page of this agreement and any
transferee or transferees of any of them permitted by Section 2(a) below. This
Warrant evidences the grant of the Warrants to Holder on November 2, 2006,
pursuant to the Debt Conversion Agreement entered into between the parties on
November 2, 2006 (the "Effective Date").
1. REPRESENTATIONS AND WARRANTIES.
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The Company represents and warrants to the Warrant Holder as follows:
(a) CORPORATE AND OTHER ACTION. The Company has all requisite power
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and authority (corporate and other), and has taken all necessary
corporate action, to authorize, execute, deliver and perform this
Warrant Agreement, to execute, issue, sell and deliver the Warrant and
a certificate or certificates evidencing the Warrant, to authorize and
reserve for issue and, upon payment from time to time of the Purchase
Price, to issue, sell and deliver, the shares of the Common Stock
issuable upon exercise of the Warrant ("Shares"), and to perform all
of its obligations under this Warrant Agreement and the Warrant. The
Shares, when issued in accordance with this Warrant Agreement, will be
duly authorized and validly issued and outstanding, fully paid and
nonassessable and free of all liens, claims, encumbrances and
preemptive rights. This Warrant Agreement and, when issued, each
Warrant issued pursuant hereto, has been or will be duly executed and
delivered by the Company and is or will be a legal, valid and binding
agreement of the Company, enforceable in accordance with its terms. No
authorization, approval, consent or other order of any governmental
entity, regulatory authority or other third party is required for such
authorization, execution, delivery, performance, issue or sale.
(b) NO VIOLATION. The execution and delivery of this Warrant
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Agreement, the consummation of the transactions herein contemplated
and the compliance with the terms and provisions of this Warrant
Agreement and of the Warrant will not conflict with, or result in a
breach of, or constitute a default or an event permitting acceleration
under, any statute, the Articles of Incorporation or Bylaws of the
Company or any indenture, mortgage, deed of trust, note, bank loan,
credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument, judgment, decree, order,
statute, rule or regulation to which the Company is a party or by
which it is bound.
(c) REGISTRATION. The Company has agreed to register the shares of
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common stock which this Warrant is exercisable for on a Form S-8
Registration Statement to be filed with the Securities and Exchange
Commission within sixty (60) days of the Effective Date of this
Warrant.
2. TRANSFER.
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(a) TRANSFERABILITY OF WARRANT. The Warrant Holder agrees that the
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Warrant is being acquired as an investment and not with a view to
distribution thereof and that; the Warrant may not be transferred,
sold, assigned or hypothecated except as provided herein. The Warrant
Holder further acknowledges that the Warrant may not be transferred,
sold, assigned or hypothecated unless pursuant to a registration
statement that has become effective under the Securities Act of 1933,
as amended (the "Act"), setting forth the terms of such offering and
other pertinent data with respect thereto, or unless the Warrant
Holder has provided the Company with an acceptable opinion from
acceptable counsel that such registration is not required.
Certificates representing the Warrant shall bear an appropriate
legend. Notwithstanding the foregoing, any request to transfer the
Warrant must be accompanied by the Form of Assignment and Transfer
attached hereto as Schedule 2 executed by the Warrant Holder.
(b) REGISTRATION OF SHARES. The Warrant Holder agrees not to make any
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sale or other disposition of the Shares except pursuant to a
registration statement which has become effective under the Act,
setting forth the terms of such offering, the underwriting discount
and commissions and any other pertinent data with respect thereto,
unless the Warrant Holder has provided the Company with an acceptable
opinion of counsel acceptable to the Company that such registration is
not required. Certificates representing the Shares, which are not
registered as provided in this Section 2, shall bear an appropriate
legend and be subject to a "stop-transfer" order.
3. EXERCISE OF WARRANT, PARTIAL EXERCISE.
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(a) EXERCISE PERIOD. This Warrant shall vest immediately upon its
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execution by the Company below, and expire and all rights hereunder
shall be extinguished Five (5) years from the date first written
above.
(b) EXERCISE IN FULL. Subject to Section 3(a), a Warrant may be
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exercised in full by the Warrant Holder by surrender of the Warrant,
with the Form of Subscription attached hereto as Schedule 3 executed
by such Warrant Holder, to the Company, accompanied by payment as
determined by 3(d) below, in the amount obtained by multiplying the
number of Shares represented by the respective Warrant by the Purchase
Price per share (after giving effect to any adjustments as provided in
Section 5 below).
(c) PARTIAL EXERCISE. Subject to Section 3(a), each Warrant may be
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exercised in part by the Warrant Holder by surrender of the Warrant,
with the Form of Subscription attached hereto as Schedule 3 at the end
thereof duly executed by such Warrant Holder, in the manner and at the
place provided in Section 3(b) above, accompanied by payment as
determined by 3(d) below, in amount obtained by multiplying the number
of Shares designated by the Warrant Holder in the Form of Subscription
attached hereto as Schedule 3 to the Warrant by the Purchase Price per
share (after giving effect to any adjustments as provided in Section 5
below). Upon any such partial exercise, the Company at its expense
will forthwith issue and deliver to or upon the order of the Warrant
Holder a new Warrant of like tenor, in the name of the Warrant Holder
subject to Section 2(a), calling in the aggregate for the purchase of
the number of Shares equal to the number of such Shares called for on
the face of the respective Warrant (after giving effect to any
adjustment herein as provided in Section 5 below) minus the number of
such Shares designated by the Warrant Holder in the aforementioned
form of subscription.
(d) PAYMENT OF PURCHASE PRICE. The Purchase Price may be made by any
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of the following or a combination thereof, at the election of the
Warrant Holder:
(i) In cash, by wire transfer, by certified or cashier's check,
or by money order; or
(ii) By delivery to the Company of an exercise notice that
requests the Company to issue to the Warrant Holder the full
number of shares as to which the Warrant is then exercisable,
less the number of shares that have an aggregate Fair Market
Value, as determined by the Board in its sole discretion at the
time of exercise, equal to the aggregate purchase price of the
shares to which such exercise relates. (This method of exercise
allows the Warrant Holder to use a portion of the shares issuable
at the time of exercise as payment for the shares to which the
Warrant relates and is often referred to as a "cashless
exercise." For example, if the Warrant Holder elects to exercise
1,000 shares at an exercise price of $0.25 and the current Fair
Market Value of the shares on the date of exercise is $1.00, the
Warrant Holder can use 250 of the 1,000 shares at $1.00 per share
to pay for the exercise of the entire Warrant (250 x $1.00 =
$250.00) and receive only the remaining 750 shares).
For purposes of this section, "Fair Market Value" shall be
defined as the average closing price of the Common Stock (if actual
sales price information on any trading day is not available, the
closing bid price shall be used) for the five trading days prior to
the date of exercise of this Warrant (the "Average Closing Bid
Price"), as reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or if the Common Stock is not
traded on NASDAQ, the Average Closing Bid Price in the
over-the-counter market; provided, however, that if the Common Stock
is listed on a stock exchange, the Fair Market Value shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the Common Stock is not quoted or listed by any organization,
the fair value of the Common Stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used). In no event shall the Fair Market Value of any share
of Common Stock be less than its par value.
4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
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Any exercise of the Warrant pursuant to Section 3 shall be deemed to
have been effected immediately prior to the close of business on the date
on which the Warrant together with the Form of Subscription and the payment
for the aggregate Purchase Price shall have been received by the Company.
At such time, the person or persons in whose name or names any certificate
or certificates representing the Shares or Other Securities (as defined
below) shall be issuable upon such exercise shall be deemed to have become
the holder or holders of record of the Shares or Other Securities so
purchased. As soon as practicable after the exercise of any Warrant in full
or in part, and in any event within Ten (10) business days thereafter, the
Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of, and delivered to the
purchasing Warrant Holder, a certificate or certificates representing the
number of fully paid and nonassessable shares of Common Stock or Other
Securities to which such Warrant Holder shall be entitled upon such
exercise, plus in lieu of any fractional share to which such Warrant Holder
would otherwise be entitled, cash in an amount determined pursuant to
Section 6(e). The term "Other Securities" refers to any stock (other than
Common Stock), other securities or assets (including cash) of the Company
or any other person (corporate or otherwise) which the Warrant Holder at
any time shall be entitled to receive, or shall have received, upon the
exercise of the Warrant, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to
Section 5 below or otherwise.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE.
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The Purchase Price and the number of Shares are subject to adjustment
from time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this
Warrant Agreement (i) declare a dividend on the Common Stock in shares
of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of
Common Stock, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then in each case the
Purchase Price, and the number and kind of Shares receivable upon
exercise, in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination, or
reclassification shall be proportionately adjusted so that the holder
of any Warrant exercised after such time shall be entitled to receive
the aggregate number and kind of Shares which, if such Warrant had
been exercised immediately prior to such record date, he would have
owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above
shall occur.
(b) No adjustment in the Purchase Price shall be required if such
adjustment is less than US $0.01; provided, however, that any
adjustments which by reason of this subsection (b) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 5 shall be
made to the nearest cent or to the nearest one-thousandth of a share,
as the case may be.
(c) Upon each adjustment of the Purchase Price as a result of the
calculations made in subsection (a) of this Section 5, the Warrant
outstanding prior to the making of the adjustment in the Purchase
Price shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of Shares (calculated to the nearest
thousandth) obtained by (i) multiplying the number of Shares
purchasable upon exercise of the Warrant immediately prior to
adjustment of the number of Shares by the Purchase Price in effect
prior to adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after
such adjustment of the Purchase Price.
6. FURTHER COVENANTS OF THE COMPANY.
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(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment of
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its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger or dissolution, avoid or
seek to avoid the observance or performance of any of the terms of the
Warrant or of this Warrant Agreement, 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 Warrant Holder against dilution or other
impairment. Without limiting the generality of the foregoing, the
Company:
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrant, all
shares of Common Stock (or Other Securities) from time to time
issuable upon the exercise of the Warrant and shall take all
necessary actions to ensure that the par value per share, if any,
of the Common Stock (or Other Securities) is at all times equal
to or less than the then effective Purchase Price per share; and
(ii) 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 or Other Securities
upon the exercise of the Warrant from time to time outstanding.
(b) TITLE TO STOCK. All Shares delivered upon the exercise of the
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Warrant shall be validly issued, fully paid and nonassessable; each
Warrant Holder shall, upon such delivery, receive good and marketable
title to the Shares, free and clear of all voting and other trust
arrangements, liens, encumbrances, equities and claims whatsoever; and
the Company shall have paid all taxes, if any, in respect of the
issuance thereof.
(c) EXCHANGE OF WARRANT. Subject to Section 2(a) hereof, upon
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surrender for exchange of any Warrant to the Company, the Company at
its expense will promptly issue and deliver to or upon the order of
the holder thereof a new Warrant or like tenor, in the name of such
holder or as such holder (upon payment by such Warrant holder of any
applicable transfer taxes) may direct, calling in the aggregate for
the purchase of the number of Shares called for on the face of the
Warrant surrendered. The Warrant and all rights thereunder are
transferable in whole or in part upon the books of the Company by the
registered holder thereof, subject to the provisions of Section 2(a),
in person or by duly authorized attorney, upon surrender of the
Warrant, duly endorsed, at the principal office of the Company.
(d) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the
Company, at the expense of the Warrant Holder, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(e) FRACTIONAL SHARES. No fractional Shares are to be issued upon the
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exercise of any Warrant, but the Company shall round any fraction of a
share to the nearest whole Share.
7. OTHER WARRANT HOLDERS: HOLDERS OF SHARES.
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The Warrant is issued upon the following terms, to all of which each
Warrant Holder by the taking thereof consents and agrees: (a) any person
who shall become a transferee, within the limitations on transfer imposed
by Section 2(a) hereof, of a Warrant properly endorsed shall take such
Warrant subject to the provisions of Section 2(a) hereof and thereupon
shall be authorized to represent himself, herself or itself as absolute
owner thereof and, subject to the restrictions contained in this Warrant
Agreement, shall be empowered to transfer absolute title by endorsement and
delivery thereof to a permitted bona fide purchaser for value; (b) any
person who shall become a holder or owner of Shares shall take such shares
subject to the provisions of Section 2(b) hereof; (c) each prior taker or
owner waives and renounces all of his equities or rights in such Warrant in
favor of each such permitted bona fide purchaser, and each such permitted
bona fide purchaser shall acquire absolute title thereto and to all rights
presented thereby; and (d) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the
registered holder thereof as the absolute owner thereof for all purposes,
notwithstanding any notice to the contrary.
8. MISCELLANEOUS.
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All notices, certificates and other communications from or at the
request of the Company to any Warrant Holder shall be mailed by first
class, registered or certified mail, postage prepaid, to such address as
may have been furnished to the Company in writing by such Warrant Holder,
or, until an address is so furnished, to the address of the last holder of
such Warrant who has so furnished an address to the Company, except as
otherwise provided herein. This Warrant Agreement and any of the terms
hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant Agreement
shall be construed and enforced in accordance with and governed by the laws
of the State of Texas. The headings in this Warrant Agreement are for
purposes of reference only and shall not limit or otherwise affect any of
the terms hereof. This Warrant Agreement, together with the forms of
instruments annexed hereto as schedules, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
For purposes of this Warrant Agreement, a faxed signature shall constitute
an original signature. A photocopy or faxed copy of this Agreement shall be
effective as an original for all purposes.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this 2nd day of November, 2006, to be effective as of the Effective
Date as defined above, by its proper corporate officers, thereunto duly
authorized.
XA, INC.
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By: /s/ Xxxxxx Xxxxxx
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XXXXXX XXXXXX,
Chief Executive Officer
SCHEDULE 1
WARRANT
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THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND REGULATION S PROMULGATED THEREUNDER; OR (B) ANY STATE SECURITIES
LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THIS WARRANT MAY NOT BE
EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS REGISTERED UNDER THE ACT OR
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT MUST BE ACQUIRED
FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR, AND NEITHER THE WARRANT NOR
THE UNDERLYING STOCK MAY BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE PROVISIONS
OF REGULATION S AND OTHER LAWS OR PURSUANT TO REGISTRATION UNDER THE ACT OR AN
AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THIS
WARRANT OR THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE ACT.
To Purchase 75,000 Shares
of Common Stock
XA, INC.
This certifies that, for value received, the hereafter named registered owner is
entitled, subject to the terms and conditions of this Warrant, until the
expiration date, to purchase the number of shares (the "Shares") set forth above
of the common stock ("Common Stock"), of XA, INC. (the "Company") from the
Company at the purchase price per share hereafter set forth below, on delivery
of this Warrant to the Company with the exercise form duly executed and payment
of the purchase price (in cash or by certified or bank cashier's check payable
to the order of the Company) for each Share purchased. This Warrant is subject
to the terms of the Warrant Agreement between the parties thereto dated as of
November 2, 2006, the terms of which are hereby incorporated herein. Reference
is hereby made to such Warrant Agreement for a further statement of the rights
of the holder of this Warrant.
Registered Owner:XXXXX X. XXXX
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Date: NOVEMBER 2, 2006
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Purchase Price
Per Share: US $0.30
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Expiration Date: Subject to Section 3(a) of the Warrant Agreement, 5:00 p.m.
Central Standard Time.
WITNESS the signature of the Company's authorized officer:
XA, INC.
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By: /s/ Xxxxxx Xxxxxx
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XXXXXX XXXXXX,
Chief Executive Officer
SCHEDULE 2
FORM OF ASSIGNMENT AND TRANSFER
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For value received, the undersigned hereby sells, assigns and transfers unto
__________________________________ the right represented by the enclosed Warrant
to purchase _________________ shares of Common Stock of XA, INC. to which the
enclosed Warrant relates, and appoints Attorney to transfer
such right on the books of XA, INC. with full power of substitution in the
premises.
The undersigned represents and warrants that the transfer of the enclosed
Warrant is permitted by the terms of the Warrant Agreement pursuant to which the
enclosed Warrant has been issued, and the transferee hereof, by his, her or its
acceptance of this Agreement, represents and warrants that he, she or it is
familiar with the terms of said Warrant Agreement and agrees to be bound by the
terms thereof with the same force and effect as if a signatory thereto.
Dated:
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(Signature must conform in all respects to name of holder
as specified on the face of the enclosed Warrant)
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(Printed Name)
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(Address)
Signed in the presence of:
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SCHEDULE 3
FORM OF SUBSCRIPTION
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(To be signed only upon exercise of Warrant)
To XA, INC.:
The undersigned, the holder of the enclosed Warrant, hereby irrevocably elects
to exercise the purchase right represented by such Warrant for, and to purchase
thereunder, * shares of Common Stock of XA, INC. and herewith
makes payment of US $_______________(or elects to pay for the exercise in shares
of common stock pursuant to Section 3(d)(ii) of the Warrant Agreement as
evidenced by the calculation below by checking this box ), and requests that the
certificate or certificates for such shares be issued in the name of and
delivered to the undersigned.
Dated:
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(Signature must conform in all respects to name of holder
as specified on the face of the enclosed Warrant)
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(Printed Name)
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(Address)
(*) Insert here the number of shares called for on the face of the Warrant or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised, in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property which, pursuant to the adjustment provisions of the Warrant
Agreement pursuant to which the Warrant was granted, may be delivered upon
exercise.
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CALCULATION PURSUANT TO SECTION 3(D)(II) OF THE WARRANT AGREEMENT
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= TOTAL SHARES EXERCISED
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------------ = PURCHASE PRICE (as defined and adjusted in the Warrant
Agreement)
= FAIR MARKET VALUE - the average closing price of the Common
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Stock (if actual sales price information on any trading day is not available,
the closing bid price shall be used) for the five trading days prior to the date
of exercise of this Warrant (the "Average Closing Bid Price"), as reported by
the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), or if the Common Stock is not traded on NASDAQ, the Average Closing
Bid Price in the over-the-counter market; provided, however, that if the Common
Stock is listed on a stock exchange, the Fair Market Value shall be the Average
Closing Bid Price on such exchange; and, provided further, that if the Common
Stock is not quoted or listed by any organization, the fair value of the Common
Stock, as determined by the Board of Directors of the Company, whose
determination shall be conclusive, shall be used). In no event shall the Fair
Market Value of any share of Common Stock be less than its par value.
Total Shares Exercised x Purchase Price
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= Shares to be Issued = Total Shares Exercised Fair Market Value
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