THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH WARRANTS AND SHARES
MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
WARRANT
TO PURCHASE SHARES OF
COMMON STOCK OF
JENKON INTERNATIONAL, INC.
No. of Shares:_____________ Holder:__________________________________________
THIS CERTIFIES THAT, for good and valuable consideration, the above
referenced holder ("Holder"), or its registered assigns, is entitled to
subscribe for and purchase from JENKON INTERNATIONAL, INC., a Delaware
corporation (the "Company"), at any time commencing one (1) year from the date
hereof and ending at the close of business five (5) years from the date hereof,
the number of fully paid and nonassessable shares of the Common Stock of the
Company set forth above at an exercise price of Fifty Cents ($.50) per share
(the "Warrant Exercise Price"), subject to the adjustment provisions of Sections
5 and 6 of this Warrant. Reference is made to this Warrant in the Bridge Loan
Agreement (the "Loan Agreement"), by and between the Company and Holder. The
shares which maybe acquired upon exercise of this Warrant are referred to herein
as the "Warrant Shares." As used herein, the term "Holder" includes any party
who acquires all or a part of this Warrant as a registered transferee of Holder,
or any record holder or holders of the Warrant Shares issued upon exercise,
whether in whole or in part, of the Warrant; the term "Common Stock" means and
includes the Company's presently authorized Common Stock, $0.001 par value.
This Warrant is subject to the following provisions, terms and conditions:
1. EXERCISE; TRANSFERABILITY.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to any fractional shares of
Common Stock), by written notice of exercise (in the form attached hereto)
delivered to the Company at the principal office
of the Company prior to the expiration of this Warrant and accompanied or
preceded by the surrender of this Warrant along with payment of the Warrant
Exercise Price for such shares (a) in cash, by check or by wire transfer of
federal funds, (b) to the extent permitted by law, by offset of principal or
interest owed under the Note (as defined in the Loan Agreement), (c) on a
cashless basis in accordance with the provisions of Section 10 of this Warrant,
or (d) by a combination of the methods specified in clauses (a), (b) and (c).
(b) This Warrant may not be sold, transferred, assigned, hypothecated
or divided except as provided in Section 7 hereof.
2. EXCHANGE AND REPLACEMENT. Subject to Sections 1 and 8 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if Holder shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this Section 2.
This Warrant shall be promptly canceled by the Company upon the surrender hereof
in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. ISSUANCE OF THE WARRANT SHARES.
(a) The Company agrees that the Warrant Shares shall be and will be
deemed to be issued to the Holder as of the close of business on the date on
which this Warrant shall have been surrendered and the payment made for such
Warrant Shares as provided herein. Subject to the provisions of the next
section, certificates for the Warrant Shares so purchased shall be delivered to
the Holder within a reasonable time, not exceeding fifteen (15) days after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the right to purchase the
number of Warrant Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws. If registrations are not in effect and
if
exemptions are not available when the Holder seeks to exercise the Warrant, the
Warrant exercise period will be extended, if need be, to prevent the Warrant
from expiring, until such time as either registrations become effective or
exemptions are available, and the Warrant shall then remain exercisable for a
period of at least 45 calendar days from the date the Company delivers to the
Holder written notice of the availability of any registrations or exemptions.
The Holder agrees to execute such documents and make such representations,
warranties, and agreements as maybe required solely to comply with the
exemptions relied upon by the Company, or any registrations made, for the
issuance of the Warrant Shares.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
or transfer upon exercise of the purchase rights evidenced by this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
5. ADJUSTMENT IN EXERCISE PRICE. In the event that the National
Association of Securities Dealers, Inc. (the "NASD") determines that the Warrant
constitutes underwriting compensation in connection with any initial public
offering by the Company, the Holder agrees that the Warrant Exercise Price may
be increased without prior notice to the Holder to an exercise price equal to no
more than the initial public offering price for the Company's Common Stock.
6. ANTI-DILUTION ADJUSTMENTS. The number of shares of Warrant Shares
purchasable upon the exercise of this Warrant and the Warrant Exercise Price
shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend or make a
distribution on its Common Stock in shares of its capital stock or other
securities, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding Common Stock into a
smaller number of shares or (iv) issue, by reclassification of its Common
Stock, shares of its capital stock or other securities of the Company
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive
the kind and number of Warrant Shares, shares of its capital stock and
other securities of the Company which such holder would have owned or would
have been entitled to receive immediately after the happening of any of the
events described above, had the Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subsection 6(a) shall become effective
immediately after the effective date of such event.
(b) In case the Company shall issue rights, options, warrants or
convertible securities to holders of its Common Stock, without any charge
to such holders, containing the right to subscribe for or purchase Common
Stock, the number of Warrant Shares thereafter purchasable upon the
exercise of this Warrant shall be determined by multiplying the number of
Warrant shares theretofore purchasable upon exercise of this Warrant by a
fraction, of which the numerator shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such rights,
options, warrants or convertible securities plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities. Such adjustment shall be made whenever such
rights, options, warrants or convertible securities are issued, and shall
become effective immediately upon issuance of such rights, options,
warrants or convertible securities. In the event of such adjustment,
corresponding adjustments shall be made to the Warrant Exercise Price.
(c) In case the Company shall distribute to holders of its Common
Stock evidences of its indebtedness or assets (excluding cash dividends or
distributions out of current earnings made in the ordinary course of
business consistent with past practices), then in each case the number of
Warrant shares thereafter purchasable upon the exercise of this Warrant
shall be determined by multiplying the number of Warrant Shares theretofore
purchasable upon exercise of this Warrant by a fraction, of which the
numerator shall be the then Market Price (as defined below) on the date of
such distribution, and of which the denominator shall be such Market Price
on such date minus the then fair value (determined as provided in
subsection 6(e) below) of the portion of the assets or evidences of
indebtedness so distributed applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall
become effective on the date of distribution.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted as herein provided, the Warrant
Exercise Price payable upon exercise of the Warrant shall be adjusted by
multiplying such Warrant Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and the denominator of which shall be the number
of Warrant Shares purchasable immediately thereafter.
(e) To the extent not covered by subsections 6(a), (b) or (c) hereof,
in case the Company shall, subsequent to the date of issuance of this
Warrant, issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock (excluding Warrants issued to
investors in connection with the Loan Agreement), at a price per share of
Common Stock (determined in the case of such rights, options, warrants, or
convertible
or exchangeable securities by dividing (x) the total amount receivable by
the Company in consideration of the sale and issuance of such rights,
options, warrants, or convertible or exchangeable securities, plus the
total minimum consideration payable to the Company upon exercise,
conversion, or exchange thereof by (y) the total maximum number of shares
of Common Stock covered by such rights, options, warrants, or convertible
or exchangeable securities) lower than the Market Price (as such term is
defined in Section 9 hereof) per share of Common Stock on the date the
Company fixes the offering price of such shares, rights, options, warrants,
or convertible or exchangeable securities, then the Warrant Exercise Price
shall be adjusted so that it shall equal the price determined by
multiplying the Warrant Exercise Price in effect immediately prior thereto
by a fraction (i) the numerator of which shall be the sum of (A) the number
of shares of Common Stock outstanding immediately prior to such sale and
issuance plus (B) the number of shares of Common Stock which the aggregate
consideration received (determined as provided below) for such sale or
issuance would purchase at such Market Price per share, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such sale and issuance. Such adjustment shall
be made successively whenever such an issuance is made. For the purposes of
such adjustment, the maximum number of shares of Common Stock which the
holder of any such rights, options, warrants or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed
to be issued and outstanding as of the date of such sale and issuance and
the consideration received by the Company therefor shall be deemed to be
the consideration received by the Company for such rights, options,
warrants, or convertible or exchangeable securities, plus the minimum
consideration or premium stated in such rights, options, warrants, or
convertible or exchangeable securities to be paid for the shares of Common
Stock covered thereby. In case the Company shall sell and issue shares of
Common Stock, or rights, options, warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of
Common Stock for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in determining the price
per share of Common Stock and the consideration received by the Company for
purposes of the first sentence of this subparagraph (b), the Board of
Directors of the Company shall determine, in good faith, the fair value of
said property, and such determination shall be described in a duly adopted
board resolution certified by the Company's Secretary. In case the Company
shall sell and issue rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock together with one or more other securities as a part
of a unit at a price per unit, then in determining the price per share of
Common Stock and the consideration received by the Company for purposes of
the first sentence of this subparagraph (b), the Board of Directors of the
Company shall determine, in good faith, which determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary, the fair value of the rights, options, warrants, or convertible
or exchangeable securities then being sold as part of such unit. Such
adjustment shall be made successively whenever such an issuance occurs, and
in the event that such rights, options, warrants, or convertible or
exchangeable securities expire or cease to be convertible or
exchangeable before they are exercised, converted, or exchanged (as the
case may be), then the Warrant Exercise Price shall again be adjusted to
the Warrant Exercise Price that would then be in effect if such sale and
issuance had not occurred, but such subsequent adjustment shall not affect
the number of Warrant Shares issued upon any exercise of Warrants prior to
the date such subsequent adjustment is made.
(f) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 6(e) above, the Holder of each Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of shares, calculated to the nearest full share,
obtained by multiplying the number of shares specified in such Warrant (as
adjusted as a result of all adjustments in the Warrant Exercise Price in
effect prior to such adjustment) by the Warrant Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Exercise Price.
(g) Upon any adjustment of the Warrant Exercise Price and the number
of Warrant Shares subject to this Warrant, then and in each such case, the
Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based.
7. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a stockholder of the Company.
8. NOTICE OF TRANSFER OF WARRANT OR RESALE OF THE WARRANT SHARES.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on the Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5 of
the Securities Act of 1933, as amended (the "Act"), and applicable state
securities laws; and provided further that the
prospective transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be reasonably required solely
to comply with the exemptions relied upon by the Company or the Holder for the
transfer or disposition of the Warrant or Warrant Shares.
(b) If in the opinion of counsel referred to in this Section 8, the
proposed transfer or disposition of this Warrant or such Warrant Shares
described in the written notice given pursuant to this Section 7 may not be
effected without registration or qualification of this Warrant or such Warrant
Shares, the Company shall promptly give written notice thereof to the Holder.
9. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the
term "Market Price" with respect to shares of Common Stock of any class or
series means the average of the last reported sale prices or, if none, the
average of the last reported closing bid and asked prices on any national
securities exchange, the Nasdaq National Market, Nasdaq SmallCap Market, or
NASD OTC Bulletin Board over the five trading days immediately preceding the
determination date. If the Company's Common Stock is not listed on a national
securities exchange or quoted on Nasdaq or the OTC Bulletin Board, the Market
Price shall be average of the last reported closing bid and asked prices as
reported in the "pink sheets" or other standard compilation of quotations by
market makers in the over-the-counter market. In the event that no quotations
are available, the "Market Price" shall be the fair market value of a share of
Common Stock as determined in good faith by the Board of Directors of the
Company.
10. RIGHT TO CONVERT WARRANT INTO COMMON STOCK; NET ISSUANCE. In addition
to any other methods of payment set forth in Section 1(a) above and in lieu of
any cash payment required thereunder, unless otherwise prohibited by law, the
Holder shall have the right at any time, when exercisable, and from time to time
to exercise this Warrant in full or in part (i) by receiving from the Company
the number of Warrant Shares equal to the number of Warrant shares otherwise
issuable upon such exercise less the number of Warrant Shares having an
aggregate value on the date of exercise equal to the Warrant Exercise Price
multiplied by the number of Warrant Shares for which this Warrant is being
exercised. For purposes hereof, the "value" of a share of Common Stock on a
given date shall equal to the Market Price on such date as defined in Section 9
of this Agreement.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the Holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and the rules of law or principles at equity governing specific
performance, injunctive relief and other equitable remedies;
(b) The Warrant Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable; and
(c) The execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Certificate of Incorporation
or by-laws of the Company, do not and will not contravene, in any material
respect, any governmental rule or regulation, judgment or order applicable to
the Company, and do not and will not conflict with or contravene any provision
of, or constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby.
12. NOTICES. Notices and other communications provided for herein shall
be in writing and may be given by mail, courier, confirmed telex or facsimile
transmission and shall, unless otherwise expressly required, be deemed given
when received or when delivery thereof is refused. In the case of Holder, such
notices and communications shall be addressed to its address as shown on the
books maintained by the Company unless Holder shall notify the Company that
notices and communications should be sent to a different address (or telex or
facsimile number) in which case such notices and communications shall be sent to
the address (or telex or facsimile number) specified by Holder.
13. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the internal laws of Delaware.
IN WITNESS WHEREOF, Jenkon International, Inc. has caused this Warrant to
be signed by its duly authorized officer this 2nd day of June, 1998.
JENKON INTERNATIONAL, INC.
By _____________________________________________
Xxxxx XxXxxx, Chief Financial Officer
JENKON INTERNATIONAL, INC.
WARRANT EXERCISE NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
The undersigned Holder of the foregoing Warrant hereby irrevocably elects
to exercise the right, represented by such Warrant, to purchase _____________
shares of the Common Stock, $0.001 par value, of JENKON INTERNATIONAL, INC. and
tenders herewith payment in accordance with Section 1 of said Warrant as
follows:
/ / _____ shares for CASH: $ _______________________
/ / _____ shares for CASHLESS EXERCISE
Please deliver the stock certificate to the address set forth below. In
addition, if the number of shares being purchased pursuant to this exercise is
less than the all of the shares purchasable under this Warrant, please return to
such address either (1) the Warrant marked to reflect the remaining balance of
shares purchasable thereunder or (2) a newly issued Warrant in the name of the
undersigned for such remaining balance of shares purchasable thereunder.
Dated: _____________________________ Name of Warrant Holder:
Tax Identification No. or _____________________________________
Social Security No. of Warrant Holder (Please Print)
____________________________________
_____________________________________
(Signature)
Title:
NOTE: THE ABOVE SIGNATURE SHOULD CORRESPOND EXACTLY WITH THE NAME OF THE WARRANT
HOLDER AS IT APPEARS ON THE FIRST PAGE OF THE WARRANT OR ON A DULY EXECUTED
WARRANT ASSIGNMENT.
JENKON INTERNATIONAL, INC.
WARRANT ASSIGNMENT
(TO BE SIGNED ONLY UPON TRANSFER OF WARRANT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________________________, the assignee,
whose address is __________________________________________________________, and
whose tax identification or social security number is _____________________,the
right represented by the foregoing Warrant to purchase ___________________shares
of the Common Stock of JENKON INTERNATIONAL, INC., to which the foregoing
Warrant relates and appoints ___________________ attorney to transfer said right
on the books of Jenkon International, Inc., with full power of substitution in
the premises. If the number of shares assigned is less than all of the shares
purchasable under the Warrant, a new Warrant will be issued in the name of the
undersigned for the remaining balance of the shares purchasable thereunder.
Dated: ___________________________ Name of Warrant Holder/Assignor:
_______________________________________
(Please print)
_______________________________________
(Signature)
Title:
Address of Warrant Holder/Assignor
_______________________________________
_______________________________________
Tax Identification No. or Social
Security No. of Warrant Holder/Assignor:
_______________________________________
NOTE: THE ABOVE SIGNATURE SHOULD CORRESPOND EXACTLY WITH THE NAME OF THE WARRANT
HOLDER AS IT APPEARS ON THE FIRST PAGE OF THE WARRANT OR ON A DULY EXECUTED
ASSIGNMENT FORM.
