Exhibit 99.4
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
WARRANT TO PURCHASE SERIES D PREFERRED STOCK
No. __ March 25, 2003
Void After March 25, 2013
THIS CERTIFIES THAT, for value received, the sufficiency of which is
hereby acknowledged, Lexington Funding LLC, with its principal address at 0000
Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxxx, XX, or its assigns (the "Holder"), is
entitled to subscribe for and purchase at the Exercise Price (defined below)
from ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC., a California corporation,
with its principal office at 0000 Xxxxxxx Xxxxx, Xx Xxxxx, XX 00000 (the
"Company") up to one thousand six hundred sixty-seven (1,667) shares of Series D
Preferred Stock of the Company (the "Series D Preferred").
1. DEFINITIONS. As used herein, the following terms shall have the following
respective meanings:
(a) "Exercise Period" shall mean the period commencing with the date hereof and
ending ten (10) years later, unless sooner terminated as provided below.
(b) "Exercise Price" shall mean, as of any given date and subject to adjustment
pursuant to Section 5 below, (i) $1.00, (ii) multiplied by a fraction, (a) the
numerator of which shall be equal to the aggregate amount of Expansion Loans (as
defined in the Loan Amendment, as defined below) taken out by the Company (the
"Drawn-Down Amount") pursuant to that certain Agreement, Amendment, Reservation
of Rights and Release of even date herewith by and among the Company, Enerdyne
Technologies, Inc., the Holder, Housatonic Micro Fund SBIC, L.P. and Housatonic
Micro Fund, L.P. (the "Loan Amendment"), and (b) the denominator of which shall
be $500,000; (iii) less any portion of the Exercise Price previously paid in
connection with the partial exercise of the Holder's rights to acquire Exercise
Shares pursuant to this Warrant.
(c) "Exercise Shares" shall mean the shares of Series D Preferred issuable upon
exercise of this Warrant, subject to adjustment pursuant to the terms herein,
including but not limited to adjustment pursuant to Section 5 below.
2. EXERCISE OF WARRANT. Subject to the vesting schedule set forth in Section 2.2
below, the rights represented by this Warrant may be exercised in whole or in
part at any time during the Exercise Period, by delivery of the following to the
Company at its address set forth above (or at such other address as it may
designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by
cancellation of indebtedness; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, and, if applicable, a new warrant evidencing the balance of the
shares of Series D Preferred remaining subject to this Warrant, shall be issued
and delivered to the Holder within a reasonable time after the rights
represented by this Warrant shall have been so exercised.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.1 Net Exercise. Notwithstanding any provisions herein to the contrary, in lieu
of exercising this Warrant by payment of 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 Notice of Exercise in which
event the Company shall issue to the Holder a number of shares of Series D
Preferred computed using the following formula:
X = Y - B
----
----
A
Where X = the number of shares of Series D Preferred to be
issued to the Holder
Y = the number of shares of Series D Preferred
purchasable under the Warrant or, if only a portion
of the Warrant is being exercised, the portion of the
Warrant being exercised (at the date of such
calculation)
A = the fair market value of one share of the Series D
Preferred (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one
share of Series D Preferred shall be determined by the Company's Board of
Directors in good faith.
2.2 Vesting Schedule. Until (i) the expiration of the Exercise Period or (ii)
all of the Exercise Shares have fully vested in accordance with this Section
2.2, the Holder's right to acquire the Exercise Shares shall be subject to a
vesting schedule such that, as of any given date, the Holder shall be entitled
to exercise its right to purchase that number of Exercise Shares equal to (i)
one-half of the Drawn-Down Amount under the Loan Amendment, (ii) divided by 150.
2.3 Automatic Exercise Upon Redemption. In the event of any redemption by the
Company of shares of Series D Preferred pursuant to Section 4 of the Company's
Certificate of Determination of Series D Preferred Stock (the "Series D
Certificate of Determination"), the Holder shall be deemed, as of immediately
prior to the Redemption Date (as defined in the Series D Certificate of
Determination), to have exercised this Warrant to purchase that portion of its
vested Exercise Shares which the Company has sufficient legally available funds
to redeem in full upon such Redemption Date (as defined in the Series D
Certificate of Determination); provided, however, that if the number of vested
Exercise Shares received by virtue of the automatic exercise of the Warrant
pursuant to this Section 2.3 is less than the aggregate number of shares of
Series D Preferred subject to this Warrant on the Redemption Date (as defined in
the Series D Certificate of Determination), a new warrant evidencing the balance
of the such shares remaining subject to this Warrant shall be issued and
delivered to the Holder within a reasonable time after Redemption Date (as
defined in the Series D Certificate of Determination). Payment of the Exercise
Price due in connection with any such automatic exercise pursuant to this
Section 2.3 shall be made by virtue of the net exercise provisions set forth in
Section 2.1 of this Warrant.
3. COVENANTS OF THE COMPANY.
3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all
Exercise Shares that may be issued upon the exercise of the rights represented
by this Warrant (and all shares of Common Stock issuable upon the conversion of
the Exercise Shares in accordance with the Series D Certificate of
Determination) will, upon issuance, be validly issued and outstanding, fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issuance thereof. The Company further covenants and agrees that the
Company will at all times during the Exercise Period, have authorized and
reserved, free from preemptive rights, a sufficient number of shares of its
Series D Preferred (and Common Stock issuable upon the conversion of the Series
D Preferred in accordance with the Series D Certificate of Determination) to
provide for the exercise of the rights represented by this Warrant. If at any
time during the Exercise Period the number of authorized but unissued shares of
Series D Preferred (or Common Stock issuable upon the conversion of the Series D
Preferred in accordance with the Series D Certificate of Determination) shall
not be sufficient to permit exercise of this Warrant, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Series D Preferred and/or Common Stock to
such number of shares as shall be sufficient for such purposes.
3.2 No Impairment. Except and to the extent as waived or consented to by the
Holder, the Company will not, by amendment of 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 to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may be necessary or appropriate in order to protect
the exercise rights of the Holder against impairment.
3.3 Notices of Record Date. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend which is the same as cash dividends paid in previous quarters) or other
distribution, the Company shall mail to the Holder, at least ten (10) days prior
to the date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
4. REPRESENTATIONS OF HOLDER.
4.1 Acquisition of Warrant for Personal Account. The Holder represents and
warrants that it is acquiring the Warrant and the Exercise Shares solely for its
account for investment and not with a view to or for sale or distribution of
said Warrant or Exercise Shares or any part thereof. The Holder also represents
that the entire legal and beneficial interests of the Warrant and Exercise
Shares the Holder is acquiring is being acquired for, and will be held for, its
account only.
4.2 Securities Are Not Registered.
(a) The Holder understands that the Warrant and the Exercise Shares have not
been registered under the Securities Act of 1933, as amended (the "Act") on the
basis that no distribution or public offering of the stock of the Company is to
be effected. The Holder realizes that the basis for the exemption may not be
present if, notwithstanding its representations, the Holder has a present
intention of acquiring the securities for a fixed or determinable period in the
future, selling (in connection with a distribution or otherwise), granting any
participation in, or otherwise distributing the securities. The Holder has no
such present intention.
(b) The Holder recognizes that the Warrant and the Exercise Shares must be held
indefinitely unless they are subsequently registered under the Act or an
exemption from such registration is available. The Holder recognizes that the
Company has no obligation to register the Warrant or the Exercise Shares of the
Company, or to comply with any exemption from such registration.
(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be
sold pursuant to Rule 144 adopted under the Act unless certain conditions are
met, including, among other things, the existence of a public market for the
shares, the availability of certain current public information about the
Company, the resale following the required holding period under Rule 144 and the
number of shares being sold during any three month period not exceeding
specified limitations. Holder is aware that the conditions for resale set forth
in Rule 144 have not been satisfied and that the Company presently has no plans
to satisfy these conditions in the foreseeable future.
4.3 Disposition of Warrant and Exercise Shares.
(a) The Holder further agrees not to make any disposition of all or any part of
the Warrant or Exercise Shares in any event unless and until:
(i) The Company shall have received a letter secured by the Holder from the
Securities and Exchange Commission stating that no action will be recommended to
the Commission with respect to the proposed disposition;
(ii) There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with said
registration statement; or
(iii) The Holder shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and if reasonably requested by the
Company, the Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, for the Holder to the effect that such
disposition will not require registration of such Warrant or Exercise Shares
under the Act or any applicable state securities laws.
(b) The Holder understands and agrees that all certificates evidencing the
shares to be issued to the Holder may bear the following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
5. ADJUSTMENTS.
5.1 Reorganization, Reclassification, Consolidation, Merger or Sale. If any
recapitalization, reclassification or reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction shall
be effected in such a way that holders of Series D Preferred shall be entitled
to receive stock, securities, or other assets or property (an "Organic Change"),
then, as a condition of such Organic Change, lawful and adequate provisions
shall be made by the Company whereby the Holder shall thereafter have the right
to purchase and receive (in lieu of the shares of the Series D Preferred
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Series D Preferred equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby; provided, however, that in the event
the value of the stock, securities or other assets or property (as determined in
good faith by the Board of Directors of the Company) issuable or payable with
respect to one share of the Series D Preferred of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby is in excess of the Stock Purchase Price hereof effective at
the time of a merger and securities received in such reorganization, if any, are
publicly traded, then this Warrant shall expire unless exercised prior to such
Organic Change. In the event of any Organic Change, appropriate provision shall
be made by the Company with respect to the rights and interests of the Holder of
this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
5.2 Certain Events. If any change in the outstanding Series D Preferred or any
other event occurs as to which the other provisions of this Section 5 do not, in
the reasonable opinion of the Board of Directors of the Company reached in good
faith, fairly and equitably protect the purchase rights of the Holder of the
Warrant in accordance with such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares available
under the Warrant, or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as to give the Holder
of the Warrant upon exercise for the same aggregate Exercise Price the total
number, class and kind of shares as he would have owned had the Warrant been
exercised prior to the event and had he continued to hold such shares until
after the event requiring adjustment
5.3 Notices of Change.
(a) Promptly following any adjustment in the number or class of shares subject
to this Warrant, the Company shall give written notice thereof to the Holder,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(b) The Company shall also give written notice to the Holder at least thirty
(30) business days prior to the date on which an Organic Change shall take
place.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of
this Warrant as a consequence of any adjustment pursuant hereto. All Exercise
Shares (including fractions) issuable upon exercise of this Warrant may be
aggregated for purposes of determining whether the exercise would result in the
issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.
7. AUTOMATIC EXERCISE UPON EXPIRATION. If this Warrant shall not have been
exercised in full as to the shares that have vested pursuant to Sections 2.2
(the "Vested Shares") on or before the end of the Exercise Period (the
"Termination Date"), then this Warrant shall be automatically exercised, without
further action on the part of the Holder hereof, in full as to the Vested Shares
(and the Holder hereof shall be deemed to be a Holder of the Exercise Shares
issued upon such automatic exercise) on and as of the Termination Date, unless
at any time on or before the Termination Date the Holder of this Warrant shall
notify the Company in writing that no such automatic exercise is to occur.
Payment of the Exercise Price due in connection with any such automatic exercise
pursuant to this section shall be made by virtue of the net exercise provisions
set forth in Section 2.1 of this Warrant, if applicable, unless at any time on
or before the Termination Date the Holder of this Warrant shall notify the
Company that such Holder elects one of the other payment options set forth
herein or if the net exercise provisions set forth in Section 2.1 are for any
reason inapplicable, the Holder shall be obligated to deliver the Exercise Price
to the Company in cash. As promptly as practicable following any such automatic
exercise, and in any event within thirty (30) days after the date that the
Holder of this Warrant surrenders this Warrant to the Company for cancellation
together with any required consideration therefor, the Company shall cause to be
issued and delivered to the Holder hereof a certificate registered in the name
of the Holder hereof (unless the Holder shall specifically instruct the Company
otherwise) representing the Exercise Shares (or other security issuable upon the
exercise hereof) issued in connection with such automatic exercise of this
Warrant minus the number of Exercise Shares, if any, applied in payment of the
Exercise Price as provided in Section 2.1.
8. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Company.
9. TRANSFER OF WARRANT. Subject to applicable laws and the restriction on
transfer set forth on the first page of this Warrant, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall sign an
investment letter in form and substance satisfactory to the Company.
10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
11. NOTICES, ETC. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
or to the Holder at their respective addresses listed on the signature page
hereto or at such other address as the Company or Holder may designate by ten
(10) days advance written notice to the other parties hereto.
12. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
13. GOVERNING LAW. This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of March 25, 2003.
ADVANCED REMOTE COMMUNICATIONS SOLUTIONS, INC.
/s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
374631 v1/SD
812F01!.DOC
NOTICE OF EXERCISE
TO: ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
(1) |_| The undersigned hereby elects to purchase ________ shares of
the Series D Preferred Stock of ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
(the "Company") pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.
|_| The undersigned hereby elects to purchase ________ shares
of the Series D Preferred Stock of the Company pursuant to the terms of the
cashless exercise provisions set forth in Section 2.1 of the attached Warrant
and shall tender payment of all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Series D Preferred Stock in the name of the undersigned or in such other name
as is specified below:
________________________
(Name)
________________________
________________________
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Series
D Preferred Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares; (ii) the undersigned is aware of the
Company's business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision
regarding its investment in the Company; (iii) the undersigned is experienced in
making investments of this type and has such knowledge and background in
financial and business matters that the undersigned is capable of evaluating the
merits and risks of this investment and protecting the undersigned's own
interests; (iv) the undersigned understands that the shares of Common Stock
issuable upon exercise of this Warrant have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), by reason of a
specific exemption from the registration provisions of the Securities Act, which
exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Securities Act, they must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available; (v) the undersigned is aware that the aforesaid
shares of Series D Preferred Stock may not be sold pursuant to Rule 144 adopted
under the Securities Act unless certain conditions are met and until the
undersigned has held the shares for the number of years prescribed by Rule 144,
that among the conditions for use of Rule 144 is the availability of current
information to the public about the Company and the Company has not made such
information available and has no present plans to do so; and (vi) the
undersigned agrees not to make any disposition of all or any part of the
aforesaid shares of Series D Preferred Stock unless and until there is then in
effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with said registration
statement, or the undersigned has provided the Company with an opinion of
counsel satisfactory to the Company, stating that such registration is not
required.
(Date) (Signature)
(Print name)
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form
and supply required information. Do not use this form
to purchase shares.
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
(Please Print)
Address:
(Please Print)
Dated: __________, 20__
Holder's
Signature:
Holder's
Address:
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
