EXHIBIT 10.7
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO FRONT PORCH DIGITAL, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
RIGHT TO PURCHASE UP TO 500,000 SHARES OF COMMON STOCK OF
FRONT PORCH DIGITAL, INC.
(SUBJECT TO ADJUSTMENT AS PROVIDED HEREIN)
COMMON STOCK PURCHASE WARRANT
No. _________________ Issue Date: October 25, 2004
FRONT PORCH DIGITAL, INC., a corporation organized under the laws of
the State of Nevada ("FPDI"), hereby certifies that, for value received, LAURUS
MASTER FUND, LTD., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company (as defined herein) from and after
the Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through the close of business October 25, 2011 (the
"Expiration Date"), up to 500,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), at the applicable Exercise Price (as defined
below) per share. The number and character of such shares of Common Stock and
the applicable Exercise Price per share are subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include FPDI and any corporation
which shall succeed, or assume the obligations of, FPDI hereunder.
(b) The term "Common Stock" includes (i) the Company's Common
Stock, par value $0.001 per share; and (ii) any other securities into
which or for which any of the securities described in (a) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the Holder of this Warrant at any
time shall be entitled to receive, or shall have
received, on 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 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall
be $0.50.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or
in part, by delivery of an original or fax copy of an exercise notice
in the form attached hereto as Exhibit A (the "Exercise Notice") up to
500,000 shares of Common Stock of the Company, subject to adjustment
pursuant to Section 4.
1.2 Fair Market Value. For purposes hereof, the "Fair Market
Value" of a share of Common Stock as of a particular date (the
"Determination Date") shall mean:
(a) If the Company's Common Stock is traded on the American
Stock Exchange or another national exchange or is quoted on the
National or SmallCap Market of The Nasdaq Stock Market, Inc.
("Nasdaq"), then the closing or last sale price, respectively, reported
for the last business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the
American Stock Exchange or another national exchange or on the Nasdaq
but is traded on the National Association of Securities Dealers, Inc.
Over-the-Counter Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company
agree or in the absence of agreement by arbitration in accordance with
the rules then in effect of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons
qualified by education and training to pass on the matter to be
decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock pursuant
to the charter in the event of such liquidation, dissolution or winding
up, plus all other amounts to be payable per share in respect of the
Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of the Warrant are outstanding at the
Determination Date.
1.3 COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing
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its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall
fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such
rights.
1.4 TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of
this Warrant pursuant to Subsection 3.2, such bank or trust company
shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the
Company or such successor person as may be entitled thereto, all
amounts otherwise payable to the Company or such successor, as the case
may be, on exercise of this Warrant pursuant to this Section 1.
2. PROCEDURE FOR EXERCISE.
2.1 DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. The
Company agrees that the shares of Common Stock purchased upon exercise
of this Warrant shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for
such shares in accordance herewith. 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
(including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder, or as such
Holder (upon payment by such Holder of any applicable transfer taxes)
may direct in compliance with applicable securities laws, a certificate
or certificates for the number of duly and validly issued, fully paid
and nonassessable shares of Common Stock (or Other Securities) to which
such Holder shall be entitled on such exercise, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash
equal to such fraction multiplied by the then Fair Market Value of one
full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 EXERCISE. Payment may be made either (i) in cash or by
certified or official bank check payable to the order of the Company
equal to the applicable aggregate Exercise Price, (ii) by delivery of
this Warrant, or shares of Common Stock and/or Common Stock receivable
upon exercise of this Warrant in accordance with Section (b) below, or
(iii) by a combination of any of the foregoing methods, for the number
of Common Shares specified in such Exercise Notice (as such exercise
number shall be adjusted to reflect any adjustment in the total number
of shares of Common Stock issuable to the Holder per the terms of this
Warrant); provided, however, that if at the time of delivery of an
Exercise Notice the shares of Common Stock to be issued upon payment of
the Exercise Price have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and are covered by an
effective registration statement under the Securities Act, payment of
the Exercise Price may only be made pursuant to clause (i) above and
may not be made pursuant to clause (ii) or (iii) above. Upon receipt
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by the Company of an Exercise Notice and proper payment of the
aggregate Exercise Price, the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined
as provided herein. Notwithstanding any provisions herein to the
contrary, if the Fair Market Value of one share of Common Stock is
greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder
may elect to receive shares equal to the value (as determined below) of
this Warrant (or the portion thereof being exercised) by surrender of
this Warrant at the principal office of the Company together with the
properly endorsed Exercise Notice, in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using
the following formula:
X=Y (A-B)
---------
A
Where X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock purchasable
under this Warrant or, if only a portion of this
Warrant is being exercised, the portion of this
Warrant being exercised (at the date of such
calculation)
A = the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
3. EFFECT OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.
3.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any
time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or
(c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, as a condition to
the consummation of such a transaction, proper and adequate provision
shall be made by the Company whereby the Holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive,
in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock
and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with
such dissolution, as the case may be, if such Holder had so exercised
this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2 DISSOLUTION. In the event of any dissolution of the
Company following the transfer of all or substantially all of its
properties or assets, the Company, concurrently with any distributions
made to holders of its Common Stock, shall at its expense deliver
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or cause to be delivered to the Holder the stock and other securities
and property (including cash, where applicable) receivable by the
Holder of this Warrant pursuant to Section 3.1, or, if the Holder shall
so instruct the Company, to a bank or trust company specified by the
Holder and having its principal office in New York, NY as trustee for
the Holder of this Warrant (the "Trustee").
3.3 CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 3, this Warrant shall continue in
full force and effect and the terms hereof shall be applicable to the
shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following
any such transfer, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of
any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant as provided in Section
4. In the event this Warrant does not continue in full force and effect
after the consummation of the transactions described in this Section 3,
then the Company's securities and property (including cash, where
applicable) receivable by the Holders of the Warrant will be delivered
to Holder or the Trustee as contemplated by Section 3.2.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in
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detail the facts upon which such adjustment or readjustment is based, including
a statement of (a) the consideration received or receivable by the Company for
any additional shares of Common Stock (or Other Securities) issued or sold or
deemed to have been issued or sold, (b) the number of shares of Common Stock (or
Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise
Price and the number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such adjustment or readjustment and
as adjusted or readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to the Holder of this Warrant and
any Warrant agent of the Company (appointed pursuant to Section 11 hereof).
6. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, the provision of a legal opinion from the
Transferor's counsel that such transfer is exempt from the registration
requirements of applicable securities laws, and with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Registration Rights Agreement dated as of even date of this Warrant
entered into by the Company and the initial Holder of this Warrant.
10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on such exercise date,
and (ii) the number of shares of Common Stock
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issuable upon the exercise of this Warrant with respect to which the
determination of this proviso is being made on such exercise date, which would
result in beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock of the Company on such date. For
the purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Notwithstanding the foregoing, the restriction described in this paragraph may
be revoked upon 75 days prior notice from the Holder to the Company and is
automatically null and void upon an Event of Default under the Note.
11. WARRANT AGENT. The Company may, by written notice to the Holder of
this Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
12. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. NOTICES, ETC. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
14. MISCELLANEOUS. 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. This Warrant shall be governed by and construed in accordance with
the laws of State of New York without regard to principles of conflicts of laws.
Any action brought concerning the transactions contemplated by this Warrant
shall be brought only in the state courts of New York or in the federal courts
located in the state of New York; provided, however, that the Holder may choose
to waive this provision and bring an action outside the State of New York. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. In the event that any
provision of this Warrant is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision hereof.
The Company acknowledges that legal counsel participated in the preparation of
this Warrant and, therefore, stipulates that the rule of
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construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Warrant to favor any party
against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
FRONT PORCH DIGITAL, INC.
WITNESS: /s/ XXXXX XXXXXXXXX By: /s/ XXXXXXX XXXXXXX
------------------------- ----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Senior Vice President - Corporate
Development and Treasurer
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EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: Front Porch Digital, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):
____________ _______ shares of the Common Stock covered by such Warrant; or
____________ the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth
in Section 2.
The undersigned herewith makes payment of the full Exercise Price for
such shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
____________ $__________ in lawful money of the United States; and/or
____________ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock
(using a Fair Market Value of $_______ per share for purposes
of this calculation); and/or
____________ the cancellation of such number of shares of Common Stock as
is necessary, in accordance with the formula set forth in
Section 2.2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable pursuant
to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be
issued in the name of, and delivered to ________________________________ whose
address is
---------------------------------------------------------------------------.
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
---------------------------- -----------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
Address:
--------------------------------
--------------------------------
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Front Porch Digital, Inc. into which the within
Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Front Porch Digital, Inc. with full power of substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
----------- ------- ----------- -----------
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Dated:
------------------------- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
------------------------------------
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SIGNED IN THE PRESENCE OF:
--------------------------------------------
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
---------------------------------------
(Name)
