Exhibit 10.3
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 100,000
Warrant No. __
WARRANT
To Purchase Common Stock of
The Network Connection, Inc.
THIS IS TO CERTIFY THAT The Shaar Fund Ltd., or
registered assigns, is entitled, at any time from the Closing
Date (as hereinafter defined) to the Expiration Date (as
hereinafter defined), to purchase from The Network Connection,
Inc., a Georgia corporation (the "Company"), 100,000 shares of
Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, including fractional
parts, at a purchase price equal to [110% of Closing Bid Price on
10/23/98] per share, all on the terms and conditions and pursuant
to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company after the Closing
Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the consolidated book
value of the Company as of the last day of any month immediately
preceding such date, divided by the number of Fully Diluted
Outstanding shares of Common Stock as determined in accordance
with GAAP (assuming the payment of the exercise prices for such
shares) by [Company accountants] or any other firm of independent
certified public accountants of recognized national standing
selected by the Company and reasonably acceptable to the Holder.
"Business Day" shall mean any day that is not a
Saturday or Sunday or a day on which banks are required or
permitted to be closed in the State of New York.
"Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the
Securities Act and other federal securities laws.
"Common Stock" shall mean (except where the context
otherwise indicates) the Common Stock, $.001 par value, of the
Company as constituted on the Closing Date, and any capital stock
into which such Common Stock may thereafter be changed, and shall
also include (i) capital stock of the Company of any other class
(regardless of how denominated) issued to the holders of shares
of Common Stock upon any reclassification thereof which is also
not preferred as to dividends or assets over any other class of
stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring
corporation received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section
4.4.
"Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable, with or without payment of
additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a
specified date or a specified event.
"Current Warrant Price" shall mean, in respect of a
share of Common Stock at any date herein specified, the price at
which a share of Common Stock may be purchased pursuant to this
Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any successor federal statute, and the
rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"Exercise Period" shall mean the period during which
this Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean a date five (5) years from
the date hereof.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of
shares thereof is to be determined, all shares of Common Stock
Outstanding at such date and all shares of Common Stock issuable
in respect of this Warrant, outstanding on such date, and other
options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be
deemed outstanding in accordance with GAAP for purposes of
determining book value or net income per share.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as from time to time
in effect.
"Holder" shall mean the Person in whose name the
Warrant or Warrant Stock set forth herein is registered on the
books of the Company maintained for such purpose.
"Market Price" per Common Share means the average of
the closing prices of the Common Shares as reported on the Nasdaq
SmallCap Stock Market ("Nasdaq"), or, if such security is not
listed or admitted to trading on the Nasdaq, on the principal
national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of
such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service,
or if not so available, in such manner as furnished by any Nasdaq
member firm of the National Association of Securities Dealers,
Inc. selected from time to time by the Board of Directors of the
Company for that purpose, or a price determined in good faith by
the Board of Directors of the Company as being equal to the fair
market value thereof, as the case may be, for the five (5)
Trading Days immediately preceding the Closing Date.
"Other Property" shall have the meaning set forth in
Section 4.4.
"Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares
thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the
Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, incorporated
organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or
department thereof).
"Registration Rights Agreement" shall mean the
Registration Rights Agreement dated a date even herewith by and
between the Company and The Shaar Fund Ltd., as it may be amended
from time to time.
"Restricted Common Stock" shall mean shares of Common
Stock which are, or which upon their issuance on the exercise of
this Warrant would be, evidenced by a certificate bearing the
restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time.
"Securities Purchase Agreement" shall mean the
Securities Purchase Agreement dated as of a date even herewith by
and between the Company and The Shaar Fund, Ltd. as it may be
amended from time to time.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would
constitute a sale thereof within the meaning of the Securities
Act.
"Transfer Notice" shall have the meaning set forth in
Section 9.2.
"Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination of, or in
substitution for, any thereof. All Warrants shall at all times
be identical as to terms and conditions and date, except as to
the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the
number of shares of Common Stock being purchased upon exercise of
this Warrant pursuant to Section 2.1, multiplied by (ii) the
Current Warrant Price as of the date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise
thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Closing Date and
until 5:00 P.M., New York time, on the Expiration Date, Holder
may exercise this Warrant, on any Business Day, for all or any
part of the number of shares of Common Stock purchasable
hereunder.
In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at
0000 Xxxxx Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxx 00000 or at the office
or agency designated by the Company pursuant to Section 12, (i) a
written notice of Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock
to be purchased, (ii) payment of the Warrant Price in cash or by
wire transfer or cashier's check drawn on a United States bank
and (iii) this Warrant. Such notice shall be substantially in
the form of the subscription form appearing at the end of this
Warrant as Exhibit A, duly executed by Holder or its agent or
attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days
thereafter, execute or cause to be executed and deliver or cause
to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as Holder shall
request in the notice and shall be registered in the name of
Holder or, subject to Section 9, such other name as shall be
designated in the notice. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so
designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the notice, together with the cash or check or checks and this
Warrant, is received by the Company as described above and all
taxes required to be paid by Holder, if any, pursuant to Section
2.2 prior to the issuance of such shares have been paid. If this
Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased
shares of Common Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this
Warrant, or, at the request of Holder, appropriate notation may
be made on this Warrant and the same returned to Holder.
Notwithstanding any provision herein to the contrary, the Company
shall not be required to register shares in the name of any
Person who acquired this Warrant (or part hereof) or any Warrant
Stock otherwise than in accordance with this Warrant.
2.2. Payment of Taxes and Charges. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms
hereof shall be validly issued, fully paid and nonassessable,
freely tradeable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and
other governmental charges that may be imposed with respect to,
the issue or delivery thereof, unless such tax or charge is
imposed by law upon Holder, in which case such taxes or charges
shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for
shares of Common Stock issuable upon exercise of this Warrant in
any name other than that of Holder, and in such case the Company
shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax
or other charge is due.
2.3. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any
Warrant. As to any fraction of a share which Holder would
otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in
an amount equal to the same fraction of the Market Price per
share of Common Stock as of the Closing Date.
2.4. Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part
(other than a holder who acquires such shares after the same have
been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder), shall
continue to be entitled with respect to such shares to all rights
to which it would have been entitled as Holder under Sections 9,
10 and 14 of this Warrant. The Company will, at the time of
exercise of this Warrant, in whole or in part, upon the request
of Holder, acknowledge in writing, in form reasonably
satisfactory to Holder, its continuing obligation to afford
Holder all such rights; provided, however, that if Holder shall
fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to Holder all such
rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Sections 9, transfer
of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained
for such purpose, upon surrender of this Warrant at the principal
office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together
with a written assignment of this Warrant substantially in the
form of Exhibit B hereto duly executed by Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall, subject to Section 9,
execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised
by a new Holder for the purchase of shares of Common Stock
without having a new Warrant issued.
3.2. Division and Combination
3.3. Subject to Section 9, this Warrant may be divided or
combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a
written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with
Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a
new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice.
3.4. Expenses. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or
Warrants under this Section 3.
3.5. Maintenance of Books. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and
the registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this
Warrant is exercisable, or the price at which such shares may be
purchased upon exercise of this Warrant, shall be subject to
adjustment from time to time as set forth in this Section 4. The
Company shall give Holder notice of any event described below
which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or
other distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the occurrence of any
such event shall be adjusted to equal the number of shares of
Common Stock which a record holder of the same number of shares
of Common Stock for which this Warrant is exercisable immediately
prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current
Warrant Price shall be adjusted to equal (A) the Current Warrant
Price multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other
distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or Additional Shares of
Common Stock), or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common
Stock),
then Holder shall be entitled to receive such dividend or
distribution as if Holder had exercised the Warrant. A
reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other
class of stock shall be deemed a distribution by the Company to
the holders of its Common Stock of such shares of such other
class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger
or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4.1.
4.3. Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the
making of adjustments of the number of shares of Common Stock for
which this Warrant is exercisable and the Current Warrant Price
provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur. For the
purpose of any adjustment, any specified event shall be deemed to
have occurred at the close of business on the date of its
occurrence.
(b) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken
into account to the nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and before
the distribution to stockholders thereof, legally abandon its
plan to pay or deliver such dividend, distribution, subscription
or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded
and annulled.
(d) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good
faith by the Holder, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected
by the Company and acceptable to the Holder.
4.4. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with
or into another corporation (where the Company is not the
surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or
sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and,
pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common
stock of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the
successor or acquiring corporation ("Other Property"), are to be
received by or distributed to the holders of Common Stock of the
Company, then Holder shall have the right thereafter to receive,
upon exercise of the Warrant, the number of shares of common
stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property
receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets
by a holder of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such event. In
case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or
acquiring corporation (if other than the Company) shall expressly
assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed
and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined by resolution of the Board of
Directors of the Company) in order to provide for adjustments of
shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this
Section 4.4, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other
class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the
arrival of a specified date or the happening of a specified event
and any warrants or other rights to subscribe for or purchase any
such stock. The foregoing provisions of this Section 4.4 shall
similarly apply to successive reorganizations, reclassifications,
mergers, consolidations or dispositions of assets.
4.5. Other Action Affecting Common Stock. In case at any time or
from time to time the Company shall take any action in respect of
its Common Stock, other than any action described in this Section
4, which would have a materially adverse effect upon the rights
of the Holder, the number of shares of Common Stock and/or the
purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances, as determined in good faith by
the Board of Directors of the Company.
4.6. Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction
which, by reason of any adjustment hereunder, would cause the
Current Warrant Price to be less than the par value per share of
Common Stock.
5. NOTICES TO HOLDER
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever
the price at which a share of such Common Stock may be purchased
upon exercise of the Warrants, shall be adjusted pursuant to
Section 4, the Company shall forthwith prepare a certificate to
be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including
a description of the basis on which the Board of Directors of the
Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in
Section 4.2), specifying the number of shares of Common Stock for
which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.4 or 4.5) describing the number and
kind of any other shares of stock or Other Property for which
this Warrant is exercisable, and any change in the purchase price
or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with
Section 15.2. The Company shall keep at its office or agency
designated pursuant to Section 12 copies of all such certificates
and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective
purchaser of a Warrant designated by the Holder.
5.2. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class
or any other securities or property, or to receive any other
right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger of the Company with,
or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company
to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to
Holder (i) at least 30 days' prior written notice of the date on
which a record date shall be selected for such dividend,
distribution or right or for determining rights to vote in
respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution,
liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up, at
least 30 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing
clause also shall specify (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the
amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up is
to take place and the time, if any such time is to be fixed, as
of which the holders of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution,
liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of
Holder appearing on the books of the Company and delivered in
accordance with Section 15.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through
any 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 of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to
protect the rights of Holder against impairment. Without
limiting the generality of the foregoing, the Company will
(a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such
increase in par value, (b) 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 upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as
may be necessary to enable the Company to perform its obligations
under this Warrant.
Upon the request of Holder, the Company will at any
time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to Holder, the continuing validity
of this Warrant and the obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at
all times reserve and keep available for issue upon the exercise
of Warrants such number of its authorized but unissued shares of
Common Stock as will be sufficient to permit the exercise in full
of all outstanding Warrants. All shares of Common Stock which
shall be so issuable, when issued upon exercise of any Warrant
and payment therefor in accordance with the terms of such
Warrant, shall be duly and validly issued and fully paid and
nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an
adjustment reducing the Current Warrant Price below the then par
value, if any, of the shares of Common Stock issuable upon
exercise of the Warrants, the Company shall take any corporate
action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of
such Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an
adjustment in the number of shares of Common Stock for which this
Warrant is exercisable or in the Current Warrant Price, the
Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by
the Company to the holders of its Common Stock with respect to
which any provision of Section 4 refers to the taking of a record
of such holders, the Company will in each such case take such a
record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in
preventing or delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be
transferred, hypothecated or assigned before satisfaction of the
conditions specified in this Section 9, which conditions are
intended to ensure compliance with the provisions of the
Securities Act with respect to the Transfer of any Warrant or any
Warrant Stock. Holder, by acceptance of this Warrant, agrees to
be bound by the provisions of this Section 9.
9.1. Restrictive Legend. (a) The Holder by accepting this
Warrant and any Warrant Stock agrees that this Warrant and the
Warrant Stock issuable upon exercise hereof may not be assigned
or otherwise transferred unless and until (i) the Company has
received an opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration
under the Securities Act of 1933, as amended (the "Securities
Act") or (ii) a registration statement relating to such
securities has been filed by the Company and declared effective
by the Commission.
Each certificate for Warrant Stock issuable hereunder
shall bear a legend as follows unless such securities have been
sold pursuant to an effective registration statement under the
Securities Act:
"The securities represented by this certificate
have not been registered under the Securities Act of
1933, as amended (the "Act"). The securities may not
be offered for sale, sold or otherwise transferred
except (i) pursuant to an effective registration
statement under the Act or (ii) pursuant to an
exemption from registration under the Act in respect of
which the Company has received an opinion of counsel
satisfactory to the Company to such effect. Copies of
the agreement covering both the purchase of the
securities and restricting their transfer may be
obtained at no cost by written request made by the
holder of record of this certificate to the Secretary
of the Company at the principal executive offices of
the Company."
(a) Except as otherwise provided in this Section 9, the Warrant
shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented
hereby have not been registered under the Securities
Act of 1933, as amended, and may not be transferred in
violation of such Act, the rules and regulations
thereunder or the provisions of this Warrant."
9.2. Notice of Proposed Transfers. Prior to any Transfer or
attempted Transfer of any Warrants or any shares of Restricted
Common Stock, the Holder shall give ten days' prior written
notice (a "Transfer Notice") to the Company of Holder's intention
to effect such Transfer, describing the manner and circumstances
of the proposed Transfer, and obtain from counsel to Holder who
shall be reasonably satisfactory to the Company, an opinion that
the proposed Transfer of such Warrants or such Restricted Common
Stock may be effected without registration under the Securities
Act. After receipt of the Transfer Notice and opinion, the
Company shall, within five days thereof, notify the Holder as to
whether such opinion is reasonably satisfactory and, if so, such
holder shall thereupon be entitled to Transfer such Warrants or
such Restricted Common Stock, in accordance with the terms of the
Transfer Notice. Each certificate, if any, evidencing such
shares of Restricted Common Stock issued upon such Transfer shall
bear the restrictive legend set forth in Section 9.1(a), and the
Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such
counsel such legend is not required in order to ensure compliance
with the Securities Act. The Holder shall not be entitled to
Transfer such Warrants or such Restricted Common Stock until
receipt of notice from the Company under this Section 9.2(a) that
such opinion is reasonably satisfactory.
9.3. Required Registration. Pursuant to the terms and conditions
set forth in the Registration Rights Agreement, the Company shall
prepare and file with the Commission not later than the [45th]
day after the Closing Date, a Registration Statement relating to
the offer and sale of the Common Stock issuable upon exercise of
the Warrants and shall use its best efforts to cause the
Commission to declare such Registration Statement effective under
the Securities Act as promptly as practicable but no later than
[105] days after the Closing Date.
9.4. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section
upon the transferability of the Warrants, the Warrant Stock and
the Restricted Common Stock (or Common Stock issuable upon the
exercise of the Warrants) and the legend requirements of Section
9.1 shall terminate as to any particular Warrant or share of
Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) (i) when and so long
as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such shares may be transferred without
registration thereof under the Securities Act. Whenever the
restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be
entitled to receive from the Company upon written request of the
Holder, at the expense of the Company, a new Warrant bearing the
following legend in place of the restrictive legend set forth
hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON
________, 19__, AND ARE OF NO FURTHER FORCE AND
EFFECT."
All Warrants issued upon registration of transfer, division or
combination of, or in substitution for, any Warrant or Warrants
entitled to bear such legend shall have a similar legend endorsed
thereon. Whenever the restrictions imposed by this Section shall
terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to
receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 9.1(a).
9.5. Listing on Securities Exchange. If the Company shall list
any shares of Common Stock on any securities exchange, it will,
at its expense, list thereon, maintain and, when necessary,
increase such listing of, all shares of Common Stock issued or,
to the extent permissible under the applicable securities
exchange rules, issuable upon the exercise of this Warrant so
long as any shares of Common Stock shall be so listed during any
such Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying
such information as may be reasonably necessary for Holder to
complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale
of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence
reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of this Warrant and indemnity
reasonably satisfactory to it (it being understood that the
written agreement of the Holder shall be sufficient indemnity),
and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant
of like tenor to Holder; provided, in the case of mutilation, no
indemnity shall be required if this Warrant in identifiable form
is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the
Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants
may be presented for exercise, registration of transfer, division
or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative
action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof,
shall give rise to any liability of Holder for the purchase price
of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the
Company.
14. MISCELLANEOUS
14.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of
Holder shall operate as a waiver of such right or otherwise
prejudice Holder's rights, powers or remedies. If the Company
fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
14.2. Notice Generally. Except as may be otherwise provided
herein, any notice or other communication or delivery required or
permitted hereunder shall be in writing and shall be delivered
personally or sent by certified mail, postage prepaid, or by a
nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit
in the United States mails, as follows:
(1) if to the Company, to:
The Network Connection, Inc.
0000 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxx
With a copy to:
Nixon, Hargrave, Devans & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
(2) if to the Holder, to:
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx 0X
Xxxxxxxxx, Xxxxxx
Attention: Xxxxxx Xxxxxxxx
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
The Company or the Holder may change the foregoing address by
notice given pursuant to this Section 14.2.
14.3. Indemnification. The Company agrees to indemnify and
hold harmless Holder from and against any liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, attorneys' fees, expenses and disbursements
of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any material
respect any of its covenants, agreements, undertakings or
obligations set forth in this Warrant; provided, however, that
the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or
disbursements are found in a final non-appealable judgment by a
court to have resulted from Holder's gross negligence, bad faith
or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.4. Remedies. Holder in addition to being entitled to
exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of Section
9 of this Warrant and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be
adequate.
14.5. Successors and Assigns. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors
of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect
to Section 9 hereof, holders of Warrant Stock, and shall be
enforceable by any such Holder or holder of Warrant Stock.
14.6. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
14.7. Severability. Wherever possible, each provision of
this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Warrant shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Warrant.
14.8. Headings. The headings used in this Warrant are for
the convenience of reference only and shall not, for any purpose,
be deemed a part of this Warrant.
14.9. Governing Law. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions
thereof relating to conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant
to be duly executed and its corporate seal to be impressed hereon
and attested by its Secretary or an Assistant Secretary.
Dated: October 23, 1998
THE NETWORK CONNECTION, INC.
By:___________________________
Name:
Title:
Attest:
By:______________________
Name:
Title:
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for the purchase of ______
Shares of Common Stock of The Network Connection, Inc. and
herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be
issued in the name of and delivered to _____________ whose
address is _________________ and, if such shares of Common Stock
shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and
date for the balance of the shares of Common Stock issuable
hereunder be delivered to the undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with
the name as written upon the face of the within Warrant
in every particular, without alteration or enlargement
or any change whatsoever.
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of
this Warrant hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned under
this Warrant, with respect to the number of shares of Common
Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of
____________ maintained for the purpose, with full power of
substitution in the premises.
Dated:__________________ Print Name:___________________
Signature:_____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with
the name as written upon the face of the within Warrant
in every particular, without alteration or enlargement
or any change whatsoever.
