EXHIBIT 4.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Endgate Corporation, a Delaware corporation
Number of Shares: See below
Class of Stock: See below
Initial Exercise Price: See below
Issue Date: March 16, 1998
Expiration Date: March 15, 2003
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth herein
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
upon the terms and conditions set forth of this Warrant The Warrant Price shall
be equal to the price per share at which the Company after the date hereof first
sells its shares of capital stock in an offering in which the Company receives
not less than Ten Million Dollars ($10,000,000) including cancellation of
indebtedness and exercise of warrants (net or cash) (the "Equity Event") and the
Shares subject to this Warrant shall be the class of securities sold in the
Equity Event provided that if the Obligations under that certain Bridge Loan and
Security Agreement between Company and Holder (the "Loan Agreement") are not
repaid in full by April 30, 1998, then, at Holder's option (elected as of
Holder's first exercise of rights hereunder), the Warrant Price shall be equal
to $3.00 per share and the type of security subject to this Warrant shall be
Series C Preferred. The number of Shares subject to the Warrant shall initially
be the quotient derived by dividing Fifteen Thousand Dollars ($15,000) by the
Warrant Price. On the date that the Company requests a Bridge Advance under the
Loan Agreement the Warrant sha11 initially be for an additional number of Shares
equal to the quotient derived by dividing Twenty Two Thousand Five Hundred
Dollars ($22,500) by the Warrant Price. On the date that the Company requests a
Bridge Advance that causes the outstanding balance under the Loan Agreement to
exceed $750,000, this Warrant shall initially be for an additional number of
Shares equal to the quotient derived by dividing Thirty Seven Thousand Five
Hundred Dollars ($37,500) by the Warrant Price.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company, Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares
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determined by dividing (a) the aggregate fair market value of the Shares or
other securities otherwise issuable upon exercise of this Warrant minus the
aggregate Warrant Price of such Shares by (b) the fair market value of one
Share. The fair market value of the Shares shall be determined pursuant Section
1.4.
1.3 NO RIGHTS AS SHAREHOLDER. This Warrant does not entitle Holder to any
voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company and its
legal counsel or, in the case of mutilation, or surrender and cancellation of
this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1.7.1 "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company in which the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2 ASSUMPTION OF WARRANT. Upon the closing of any Acquisition the
successor entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same securities, cash, and property a would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. Notwithstanding the foregoing, if the successor entity does not
assume the obligations of the Warrant, the Company and such successor shall pay
Holder in cash an amount equal to three (3.) times the Warrant Price per share,
not later thin the closing of such Acquisition. In exchange for such payment,
this Warrant shall be canceled as of the date of the Acquisition.
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1.7.3 PUBLIC OFFERING. For purposes of this Warrant, a "Public
Offering" means the sale of the Company's Common Stock pursuant to a
registration statement under the Securities Act of 1933, as amended, for an
underwritten public offering (other than a registration on Form X-0, Xxxx X-0 or
comparable forms), which results in aggregate cash proceeds (prior to
underwriters' commissions and expenses) to the Company of more than $7,500,000.
Immediately prior to the closing of any Public Offering prior to the Expiration
Date, any portion of this Warrant then not exercised or exercisable will be
exercisable for the number of shares of the Company's Common Stock that would
have resulted from the conversion, pursuant to the Company's Articles of
Incorporation then in effect in the amount of the maximum number of shares of
Preferred Stock that could have been acquired by the Holder upon the exercise of
the unexpired portion of this Warrant immediately prior to such Public Offering.
ARTICLE 2 ADJUSTMENT TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS. ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
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2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The number of shares of common
stock issuable upon conversion of the Shares, shall be subject to adjustment,
from time to time in the manner set forth on Exhibit A in the event of Diluting
Issuances (as defined on Exhibit A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, 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 to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article 2 against impairment.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company shall promptly compute such adjustment, and furnish Holder
with a certificate of its Chief Financial Officer setting forth such adjustment
and the facts upon which such adjustment is based. The Company shall, upon
written request with reasonable notice, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares (assuming payment of the Warrant Price),
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws. The issued and outstanding shares of the Company on the Issue Date are set
forth in the capitalization table attached hereto.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to effect any reclassification or recapitalization of common stock; or (c)
to merge or consolidate with or into any other corporation, or sell, or
otherwise convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (d) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) in respect of the matters referred to in (b) and (c) above, at least
20 days prior written notice of the date on which a record will be taken for
such dividend or distribution rights (and specifying the date on which the
holders of common stock will
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be entitled thereto) or for determining rights to vote, if any; (2) in the case
of the matters referred to in (b) and (c) above at least 20 days prior written
notice of the date when the same will take place (and specifying the date on
which the holders of common stock will be entitled to exchange their common
stock for securities or other property deliverable upon the occurrence of such
event); and (3) in the case of the matter referred to in (d) above, the same
notice as is given to the holders of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or any
of the Shares, the Company shall deliver to the Holder promptly after mailing,
copies of all notices or other written communications it would be entitled to
were it a shareholder.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Holder of
the Warrant shall become a party to the Amended and Restated Investor Rights
Agreement, except for the right of first refusal set forth therein, and the
common stock into which the Shares are convertible shall be subject to the
registration rights granted to the purchasers in the Equity Event or, if this
Warrant is for another Series of Preferred Stock, then the registration rights
held by the purchasers of such Preferred Stock.
ARTICLE 4. REPRESENTATIONS AND COVENANTS OF HOLDER.
This Warrant has been entered into by the Company in reliance upon the
following representations and covenants of Holder, which by its acceptance
hereof the Holder (including any permitted transferee of Holder on behalf of
such transferee) hereby confirms:
4.1 INVESTMENT PURPOSE. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of Holder's rights contained herein will
be acquired for investment and not with a view to the sale or distribution of
any part thereof; and the Holder has no present intention of selling or engaging
in any public distribution of the same except pursuant to a registration or
exemption.
4.2 PRIVATE ISSUE. Holder understands (i) that the Preferred Stock,
issuable upon exercise of the Holder's rights contained herein is not registered
under the 1933 Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by this Warrant Agreement will be exempt
from the registration and qualifications requirements thereof; and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 4.
4.3 FINANCIAL RISK. Holder has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment and has the ability to bear the economic risks of its investment.
4.4 RISK OF NO REGISTRATION. Holder understands that if the Company does
not register with the Securities and Exchange Commission pursuant to Section 12
of the 1933 Act, or file reports pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the 1933 Act is not in effect when it desires to sell (i)
the rights to purchase Preferred Stock pursuant to this Warrant Agreement, or
(ii) the Preferred Stock issuable upon exercise of the right to purchase, it may
be required to hold
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such securities for an indefinite period. The Holder also understands that any
sale of the rights of the Holder to purchase Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
4.5 ACCREDITED INVESTOR. Holder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Act, as presently in effect.
ARTICLE 5. MISCELLANEOUS.
5.1 TERM. This Warrant is exercisable, in whole or in part, at any time and
from time to time on or before the Expiration Date.
5.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
5.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
5.4 TRANSFER PROCEDURE. Subject to the provisions of Sections 4.2 and 4.3,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
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5.5 NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
5.6 WAIVER. This Warrant and any term 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.
5.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
ENDGATE CORPORATION
By: /s/ XXXXXX XXXXXX, XX.
----------------------------------------------
Title: PRESIDENT AND CEO
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APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ___________shares of the
Common/Series __________ Preferred [strike one] Stock of _________________
pursuant to the terms of the attached Warrant and tenders herewith payment of
the purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _____________________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
--------------------------------
(Name)
--------------------------------
--------------------------------
(Address)
4. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
-----------------------------
(Signature)
-----------------------------
(Date)
EXHIBIT A
Anti-Dilution Provisions
(FOR PREFERRED STOCK WARRANTS WITH EXISTING ANTI-DILUTION PROTECTION)
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Certificate of Incorporation that apply to
Diluting Issuance's with respect to the class or series of the Company's stock
for which this Warrant is exercisable.
