EXHIBIT 4.1
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS UNLESS OFFERED, SOLD OR OTHERWISE
TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THOSE LAWS.
COMMON STOCK PURCHASE WARRANT
Company: SOFTNET SYSTEMS, INC., a New York corporation
("Company")
Number of Shares: 3,013 (Three Thousand Thirteen Shares)
Class of Stock: Common Stock
Initial Exercise Price: $29.875 per share
Issued as of: March 22, 1999
Expiration Date: As described in Section 1
FOR VALUE RECEIVED, the adequacy and receipt of which are hereby
acknowledged, SOFTNET SYSTEMS, INC., a New York corporation, hereby certifies
that subject to the terms and conditions herein set forth, FINOVA Capital
Corporation, a Delaware corporation, and its successors and assigns, as the
registered holder of this Warrant is entitled upon surrender of this Warrant to
purchase from the Company at its principal offices, at any time and from time to
time on and after the date hereof until 6:00 p.m. California local time on the
Expiration Date at an initial Exercise Price (as described in Section 1), fully
paid and nonassessable shares of Common Stock of the Company (the "Shares"). The
number of such shares of Common Stock and the Exercise Price are subject to
adjustment as provided in the Warrant.
1. Certain Definitions. As used in this Warrant, the following terms
have the following definitions:
"Common Stock" means the Company's Common Stock, $.01 par
value, and includes any common stock of the Company of any class or classes
resulting from any reclassification or reclassifications thereof.
"Company" means SOFTNET SYSTEMS, INC., a New York corporation.
"Convertible Securities" means evidence of indebtedness,
shares of stock or other securities that are at any time directly or indirectly
convertible into or exchangeable for shares of Common Stock.
"Current Market Price" of a share of Common Stock or of any
other security as of a relevant date means with respect to such Common Stock or
other securities,: (i) the Fair Value thereof as determined in accordance with
clause (ii) of the definition of Fair Value with respect to Common Stock or any
other security that is not listed on a national securities exchange or traded on
the over-the-counter market or quoted on NASDAQ, or (ii) the Closing Price on
such date (excluding any trades which are not bona fide arm's length
transactions) with respect to Common Stock or any other security that is listed
on a national securities exchange or traded on the over-the-counter market or
quoted on NASDAQ. The closing price for each day shall be defined as (i) the
last sale price of shares of Common Stock or such other security on such date
or, if no such sale takes place on such date, the average of the closing bid and
asked prices thereof on such date, in each case as officially reported on the
principal national securities exchange on which the same are then listed or
admitted to trading, or (ii) if no shares of Common Stock or if no securities of
the same class as such other security are then listed or admitted to trading on
any national securities exchange, the average of the reported closing bid and
asked prices thereof on such date in the over-the-counter market as shown by
NASDAQ or, if no shares of Common Stock or if no securities of the same class as
such other security are then quoted in such system, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in
either case as reported by any member firm of the New York Stock Exchange
selected by the Warrantholders.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means the period commencing on the date
hereof and ending at 6:00 p.m. California local time on the Expiration Date.
"Exercise Price" means initially Twenty-nine and 87.5/100
Dollars ($29.875) per share, subject to adjustment as provided in this Warrant.
"Expiration Date" means the date that is four (4) years after
the date hereof.
"Fair Value" means: (i) with respect to a share of Common
Stock or any other security, the Current Market Price thereof, or (ii) with
respect to any other property, assets, business or entity, or if the Shares have
not been registered under the Securities Act, an amount determined in good faith
by the Board of Directors of the Company.
"Indemnified Party" and "Indemnifying Party" have the meanings
set forth in Section 11(e)(iii).
"Registrable Stock" means: (i) all Warrant Shares which are
issuable to the Warrantholders pursuant to the Warrants, whether or not the
Warrants have in fact been exercised and whether or not such Warrant Shares have
in fact been issued, (ii) all Warrant Shares acquired by the Warrantholders
pursuant to the Warrants, and (iii) any shares of Common Stock, whether or not
such shares of Common Stock have in fact been issued, and stocks or other
securities of the Company issued upon conversion of, in a stock split or
reclassification of, or a stock dividend or other distribution on, or in
substitution or exchange for, or otherwise in connection with, such Warrant
Shares or in a merger or consolidation involving the Company or its assets;
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provided, however, that the foregoing securities shall not be considered
Registrable Stock if they were previously registered pursuant to Section 11
hereunder or if they are transferable without registration pursuant to Rule
144(k) under the Securities Act. For purposes of Section 11, a Warrantholder of
record shall be treated as the record holder of the related Warrant Shares and
other securities issuable pursuant to the Warrants.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant(s)" means this Warrant and any warrants issued in
exchange or replacement of this Warrant or upon transfer hereof.
"Warrantholder(s) and "Holder" means FINOVA Capital
Corporation, a Delaware corporation, and its successors and assigns.
"Warrant Shares" means shares of Common Stock or other
securities issuable to Warrantholders pursuant to the Warrants.
2. Exercise of Warrant. This Warrant may be exercised, in whole or in
part, at any time and from time to time during the Exercise Period by written
notice to the Company (accompanied by physical surrender of this Warrant) and
upon payment to the Company of the Exercise Price (subject to adjustment as
provided herein) for the Warrant Shares.
3. Form of Payout of Exercise Price. Anything contained herein to the
contrary notwithstanding, at the option of the Warrantholders, the Exercise
Price may be paid in any one or a combination of the following forms: (a) by
wire transfer to the Company, (b) by a certified or cashier's check to the
Company, (c) by the cancellation of any indebtedness owed by the Company and/or
any subsidiaries of the Company to the Warrantholder, as evidenced by documents
or instruments effecting such cancellation and/or (d) by the surrender to the
Company of that number of Warrant Shares having a Fair Value equal to the
Exercise Price in accordance with Section 4 below.
4. Cashless Exercise. In lieu of exercising this Warrant as specified
in Sections 2 and 3 above, the Warrantholders may from time to time at the
Warrantholders' option convert this Warrant, in whole or in part, into a number
of shares of Common Stock of the Company determined by dividing (A) the
aggregate Fair Value of the exercisable Warrant Shares minus the aggregate
Exercise Price of such Warrant Shares by (B) the Fair Value of one such Warrant
Shares. The Warrantholder and the Company shall execute such documents as the
Company deems reasonably necessary to evidence such cashless exercise.
5. Certificates for Warrant Shares; New Warrant. The Company agrees
that the Warrant Shares shall be deemed to have been issued to the
Warrantholders as the record owners of such Warrant Shares as of the close of
business on the date on which payment for such Warrant Shares has been made (or
deemed to be made by cashless exercise) in accordance with the terms of this
Warrant. Certificates for the Warrant Shares shall be delivered to
Warrantholders within a reasonable time, not exceeding ten (10) days, after this
Warrant has been exercised. A new Warrant representing the number of shares, if
any, with respect to which this Warrant remains exercisable also shall be issued
to the Warrantholders within such time so long as this Warrant has been
surrendered to the Company at the time of exercise.
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6. Adjustment of Exercise Price, Number of Shares and Nature of
Securities Issuable Upon Exercise of Warrants.
(a) Exercise Price; Adjustment of Number of Shares. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Exercise Price, the Warrantholders shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, a number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification 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 to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive cash, stock, securities or assets with respect to or in
exchange for Common Stock, then, upon such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the Warrantholders shall thereafter have the same right to purchase and
receive Warrant Shares upon the basis and upon the terms and conditions
specified in this Warrant. Upon exercise, payment of the Exercise Price and
surrender of this Warrant and in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, the Warrantholder shall receive such cash, shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of Common Stock equal to the number
of shares of such Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In any such case
appropriate provision shall be made with respect to the rights and interests of
the Warrantholders to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number
of shares purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be practicable, in relation to any
shares of stock securities or assets thereafter deliverable upon the exercise
hereof.
(c) Stock Splits and Reverse Splits. In the event the Company:
(i) subdivides its outstanding Common Stock into a greater number of shares, or
(ii) combines its outstanding Common Stock into a smaller number of shares, then
(1) the Exercise Price on the record date of such division or distribution or
the effective date of such action shall be adjusted by multiplying such Exercise
Price by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately before such event and the denominator of which is
the number of shares of Common Stock outstanding immediately after such event,
and (2) the number of shares of Common Stock for which this Warrant Certificate
may be exercised immediately before such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the Exercise Price
immediately before such event and the denominator of which is the Exercise Price
immediately after such event.
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(d) Dissolution, Liquidation and Wind-Up. In case the Company
shall, at any time prior to the expiration of this Warrant, dissolve, liquidate
or wind up its affairs, the Warrantholders shall be entitled, upon the surrender
of this Warrant, to receive, in lieu of the shares of Common Stock that such
Warrantholders would have been entitled to receive, the same kind and amount of
assets as would have been issued, distributed or paid to such Warrantholders
upon any such dissolution, liquidation or winding up with respect to such shares
of Common Stock, had such Warrantholders been the holders of record of the
Warrant Shares on the record date for the determination of those persons
entitled to receive any such liquidating distribution. If such Warrantholders
are entitled to receive any liquidating distribution and after any such
dissolution, liquidation or winding up that shall result in any cash
distribution in excess of the Exercise Price provided for by this Warrant, the
Warrantholders may, at each such Warrantholder's option, exercise the same
without making payment of the Exercise Price subject to the following provision:
In such case the Company shall, upon the distribution to said Warrantholders
deduct from the amount payable to such Warrantholders an amount equal to such
Exercise Price and, consider that said Exercise Price has been paid in full to
it and in making settlement to said Warrantholders.
(e) Adjustment Certificate. In each case of an adjustment in
the number of shares of Common Stock or other stock, securities or property
receivable on the exercise of the Warrants, the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare and duly
execute and deliver to the Warrantholders a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
7. Special Agreements of the Company.
(a) Reservation of Shares. The Company covenants and agrees
that all Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and 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, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.
(b) Avoidance of Certain Actions. The Company will not, by
amendment of its Certificate of Incorporation or through any capital
reorganization, transfer of assets, consolidation, merger, issue or sale of
securities or any other voluntary action, avoid or take any action which would
have the effect of avoiding 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 carrying out all of the provisions of this Warrant and in taking
all of such actions as may be necessary or appropriate in order to protect the
rights of the Warrantholders hereunder.
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(c) Listing on Securities Exchanges; Registration. If, and so
long as, any class of the Company's Common Stock shall be listed on any national
securities exchange (as defined in the Exchange Act), the Company will, at its
expense, obtain and use its best efforts to maintain the approval for listing
upon official notice of issuance of all Warrant Shares and maintain the listing
of Warrant Shares after their issuance; and the Company will use its best
efforts to list on such national securities exchange, and will use its best
efforts to maintain such listing of, any other securities that at any time are
issuable upon exercise of this Warrant if and at the time any securities of the
same class shall be listed on such national securities exchange by the Company.
8. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, such
fraction shall be rounded down to the nearest whole share. A fraction
represented as of .51 or higher shall be rounded up to the next highest integer.
9. Notices of Stock Dividends, Subscriptions, Reclassifications,
Consolidations, Mergers, etc. If at any time: (i) the Company shall declare a
cash or stock dividend (or an increase in the then existing dividend rate), or
declare a dividend on Common Stock payable otherwise than in cash out of its net
earnings after taxes for the prior fiscal year, or (ii) the Company shall
authorize the granting to the holders of Common Stock of rights to subscribe for
or purchase any shares of capital stock of any class or of any other rights; or
(iii) there shall be any capital reorganization, or reclassification, or
redemption of the capital stock of the Company, or consolidation or merger of
the Company with, or sale of all or substantially all of its assets to, another
corporation or firm; or (iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company, then the Company shall
give to the Warrantholders at the addresses of such Warrantholders as shown on
the books of the Company, at least ten (10) days prior to the applicable record
date hereinafter specified, a written notice summarizing such action or event
and stating the record date for any such dividend or rights (or, if a record
date is not to be selected, the date as of which the holders of Common Stock of
record entitled to such dividend or rights are to be determined), the date on
which any such reorganization, reclassification, consolidation, merger, sale of
assets, dissolution, liquidation or winding up is expected to become effective,
and the date as of which it is expected the holders of Common Stock of record
shall be entitled to effect any exchange of their shares of Common Stock for
cash (or cash equivalent), securities or other property deliverable upon any
such reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up.
Any notice or written communication required or permitted to be given
to the holders and the names and addresses of all registered holders of the
Warrants may be given by certified or overnight mail delivery to the holder at
the address shown on such register.
10. Registered Holder, Transfer of Warrants or Warrant Shares.
(a) Maintenance of Registration Books; Ownership of this
Warrant. The Company shall keep at its principal office a register in which the
Company shall provide for the registration, transfer and exchange of this
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Warrant and the names and addresses of all registered holders of the Warrants.
The Company shall not at any time, except upon the dissolution, liquidation or
winding-up of the Company, close such register so as to result in preventing or
delaying the exercise or transfer of this Warrant.
(b) Exchange and Replacement. To the extent permissible under
any applicable securities laws, this Warrant is exchangeable upon surrender
hereof by the registered holder to the Company at its principal office for new
Warrants of like tenor and date representing in the aggregate the right to
purchase the number of shares purchasable hereunder, each of such new Warrants
to represent the right to purchase such number of shares as shall be designated
by said registered holder at the time of surrender. This Warrant and all rights
hereunder are transferable in whole or in part upon the books of the Company by
the registered holder hereof in person or by duly authorized attorney, and new
Warrants shall be made and delivered by the Company, of the same tenor and date
as this Warrant but registered in the name of the transferee(s), upon surrender
of this Warrant, duly endorsed, to said office of the Company. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, 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, without requiring the posting of any
bond or the giving of any other security. This Warrant shall be promptly
canceled by the Company upon the surrender hereof in connection with any
exchange, transfer or replacement. The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section 10.
11. Registration.
(a) Incidental Registration. Each time the Company shall
determine to file a registration statement under the Securities Act (other than
on Form S-8 or Form S-4, or any successor form thereof) in connection with the
proposed offer and sale for money of any of its equity securities by it or by
any of its security holders, the Company will give written notice of its
determination to all holders of Registrable Stock. Upon the written request of a
holder of any Registrable Stock delivered to the Company within fifteen (15)
days following the Company's notice (except with respect to an initial public
offering), the Company will cause all such Registrable Stock, the holders of
which have so requested registration thereof, to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Registrable Stock to be
so registered in accordance with the terms of the proposed offering. If the
registration statement is to cover an underwritten distribution, the Company
shall use its best efforts to cause the Registrable Stock requested for
inclusion pursuant to this Section 11(a) to be included in the underwriting on
the same terms and conditions as the securities otherwise being sold through the
underwriters. If, in the good faith judgment of the managing underwriter of such
public offering, the inclusion of all of the Registrable Stock requested to be
registered would materially and adversely affect the successful marketing of the
other shares proposed to be offered, then the amount of the Registrable Stock to
be included in the offering shall be reduced and the Registrable Stock and the
other shares to be offered (excluding shares to be offered by or for the account
of the Company) shall participate in such offering as follows: the Registrable
Stock to be included in such offering and the other shares of Common Stock to be
included in such offering shall each be reduced pro rata in proportion to the
number of shares of Common Stock proposed to be included in such offering by
each holder of such shares; and provided further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable Stock
shall be made pro rata with holders of other securities having the right to
include such securities in a Company registration statement other than the RGC
Investors (as defined below) and holders of securities not subject to a similar
cut-back provision.
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Notwithstanding the immediately preceding paragraph, the registered
holder hereunder hereby acknowledges that the Company is party to a Registration
Rights Agreement (the "RGC Agreement") dated as of August 31, 1998 granting
certain Registration Rights to the investors set forth therein (the "RGC
Investors"), and further acknowledges and agrees that the rights of the holder
to include their shares in any registration by the Company shall expressly be
made subordinate to the right of the RGC Investors to include all of their
"Registrable Securities" as defined by the RGC Agreement, in such registration .
(b) Registration Procedures. If and whenever the Company is
able, pursuant to the provisions of Section 11(a), to effect the registration of
Registrable Stock under the Securities Act, the Company will, at its expense, as
expeditiously as possible:
(i) In accordance with the Securities Act and
the rules and regulations of the Commission, prepare and file with the
Commission a registration statement on the form of registration statement
appropriate with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective until the securities
covered by such registration statement have been sold, and prepare and file with
the Commission such amendments to such registration statement and supplements to
the prospectus contained therein as may be necessary to keep such registration
statement effective and such registration statement and prospectus accurate and
complete until the securities covered by such registration statement have been
sold; provided, however, that in no event shall the Company be required to keep
any such registration statement effective for a period in excess of twelve (12)
months (plus the number of days, if any, during such twelve (12) month period
that the Warrantholders shall be restricted from selling shares pursuant to
Section 11(d) hereof);
(ii) If the offering is to be underwritten, in
whole or in part, enter into a written underwriting agreement with the holders
of the Registrable Stock participating in such offering and the underwriter in
form and substance reasonably satisfactory to the Company, the managing
underwriter of the public offering and the holders of the Registrable Stock
participating in such offering;
(iii) Furnish to the holders of securities
participating in such registration and to the underwriters of the securities
being registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
underwriters and holders may reasonably request in order to facilitate the
public offering of such securities;
(iv) Use its best efforts to register to qualify
the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating holders
and underwriters may reasonably request;
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(v) Notify the holders participating in such
registration, promptly after it shall receive notice thereof, of the date and
time when such registration statement and each post-effective amendment thereto
has become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(vi) Notify such holders promptly of any request
by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) Prepare and promptly file with the
Commission, and promptly notify such holders of the filing of, such amendments
or supplements to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect may include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(viii) In case any of such holders or any
underwriter for any such holders is required to
deliver a prospectus at a time when the prospectus then in circulation is not in
compliance with the Securities Act or the rules and regulations of the
Commission, prepare promptly upon request such amendments or supplements to such
registration statement and such prospectus as may be necessary in order for such
prospectus to comply with the requirements of the Securities Act and such rules
and regulations;
(ix) Advise such holders, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceedings for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(x) Prepare a prospectus supplement or post-
effective amendment to the registration statement or the related prospectus or
any document incorporated therein by reference or file any other required
documents so that, as thereafter delivered to the purchasers of the Registrable
Stock, the prospectus will not contain an untrue statement of material fact or
omit to state any material fact necessary to make the statements therein not
misleading; and
(xi) Otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make generally
available to the Company's security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than forty-five (45)
days after the end of any twelve (12) month period (or ninety (90) days, if such
a period is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Stock is sold to underwriters in an underwritten offering, or,
if not sold to underwriters in such an offering, (ii) beginning with the first
month of the Company's first fiscal quarter commencing after the effective date
of a registration statement. The filing of such statements pursuant to the
electronic filing system XXXXX, shall be deemed to have made such information
generally available.
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(c) Expense of Registration. Except where specifically
referenced in this Warrant, all expenses incident to the Company's performance
of or compliance with this Warrant (excluding discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Stock or legal
expenses of any person other than the Company) shall be borne by the Company.
The selling holders shall bear any legal expenses incurred by them in connection
with any registration pursuant to this Section 11.
(d) Suspension of Offers and Sales. If, during the
effectiveness of a registration statement filed pursuant to this Section 11, an
intervening event shall have occurred which, in the opinion of the Company's
counsel, makes the prospectus included in such registration statement no longer
comply with the Securities Act, after notice from the Company containing such
fact, the Warrantholders shall make no further sales or other dispositions, or
offers therefor, of securities under such registration statement until it
receives from the Company copies of a new, amended or supplemented prospectus
complying with the Securities Act as soon as practicable after such notice. The
Company shall keep the Warrantholders informed of the status of its efforts,
which shall be prompt and diligent, to cause such new, amended or supplemented
prospectus to be available for use by such Warrantholders.
(e) Indemnification.
(i) The Company hereby agrees to indemnify each
of the holders of Registrable Stock against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any registration statement, preliminary or final prospectus, or other document
incident to any such registration, qualification or compliance (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and to reimburse the holders of Registrable Stock (including officers and
directors of the same and controlling persons) for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided, however, the Company
will not be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by
Warrantholders specifically for use therein.
(ii) The Warrantholders severally and not
jointly agree to indemnify the Company and its officers and directors and each
person, if any, who controls any thereof within the meaning of Section 15 of the
Securities Act and their respective successors against all claims, losses,
damages and liabilities (or actions in respect hereof) arising out of or based
on any untrue statement of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification or
compliance relating to securities purchased pursuant to the Warrants (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading and will reimburse
the Company and each other person indemnified pursuant to this subsection (ii)
for any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage) liability or action;
provided, however, that this subsection (ii) shall apply only if (and only to
the extent that) such statement or omission was made in reliance upon
information (including, without limitation, written negative responses to
inquiries) furnished to the Company by Warrantholders specifically for use in
such prospectus, or any such other document (or related registration statement,
notification or the like) or any amendment or supplement thereto.
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(iii) Each party entitled to indemnification
hereunder (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party (at such Indemnifying Party's
expense) to assume the defense of any claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or litigation, shall be reasonably satisfactory to the
Indemnified Party, and the Indemnified Party may participate in such defense at
such party's expense, and provided further, that the omission by any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 11(e) except to the extent that the
omission results in a failure of actual notice to the Indemnifying Party and
such Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(iv) If the indemnification provided for in this
Section 11(e) is unavailable or insufficient to hold harmless an Indemnified
Party in respect of any losses, claims, damages, liabilities, expenses or
actions in respect thereof referred to herein, then the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities, expenses or actions in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand, and the Indemnified Party on the other, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities, expenses or actions as well as any other relevant equitable
considerations, including the failure to give the notice required hereunder. The
relative fault of the Indemnifying Party and the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Warrantholders agree that it would
not be just and equitable if contributions pursuant to this Section 11(e) were
determined by pro rata allocation or by any other method of allocation which did
not take account of the equitable considerations referred to above. The amount
paid or payable to an Indemnified Party as a result of the losses, claims,
damages, liabilities or actions in respect thereof, referred to above, shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the contribution provisions of this Section 11(e), in
no event shall the amount contributed by any seller of Registrable Stock exceed
the aggregate net offering proceeds received by such seller from the sale of
Registrable Stock to which such contribution or indemnification claim relates.
No person guilty of fraudulent misrepresentations (within the meaning of Section
11(e) of the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
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(v) The indemnification required by this
Section 11(e) shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
Anything contained herein to the contrary notwithstanding, the liability of any
holder of Registrable Stock under this Section 11(e) shall not exceed the amount
of the net proceeds actually received by such holder from the sale of its
Registrable Stock pursuant to the registration, qualification, notification or
compliance in respect of which such liability arose.
(f) Reporting Requirements Under Exchange Act. The Company
shall use its best efforts to maintain the registration of its Common Stock
under Section 12 of the Exchange Act and shall keep effective such registration
and shall timely file such information, documents and reports the Commission may
require or prescribe under Section 13 of the Exchange Act, or otherwise. The
Company shall forthwith upon request, furnish any holder of Registrable Stock
(i) a written statement by the Company that it has complied with such reporting
requirements, (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents filed by the Company with
the Commission as such holder may reasonably request in availing itself of an
exemption for the sale of Registrable Stock without registration under the
Securities Act. The Company acknowledges and agrees that the purpose of the
requirements contained in this Section 11(f) is to enable any such holder to
comply with the current public information requirement contained in Rule 144
under the Securities Act should such holder ever wish to dispose of any of the
securities of the Company acquired by it without registration under the
Securities Act in reliance upon Rule 144 (or any other similar exemptive
provision). In addition, the Company shall take such other measures and file
such other information, documents and reports as shall hereafter be required by
the Commission as a condition to the availability of Rule 144 and Rule 144A
under the Securities Act (or any similar exemptive provision hereafter in
effect).
(g) Stockholder Information. The Company shall require each
holder of Registrable Stock as to which any registration is to be effected
pursuant to this Section 11 to furnish the Company such information with respect
to such holder and the distribution of such Registrable Stock as shall be
required by law or by the Commission in connection therewith.
12. Representation and Warranties of the Company. The Company hereby
represents and warrants to and covenants with Warrantholder, and each holder of
Warrant Shares that:
(a) Organization and Capitalization of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York. As of the date hereof, the authorized
capital of the Company consists of 25,000,000 shares of Common Stock and
4,000,000 of Preferred Stock; 10,397,641 (Common) and 7,625.39 (Preferred) of
which are issued and outstanding. The Company has, and at all times during the
Exercise Period will have, reserved for issuance pursuant to the Warrants that
number of shares of Common Stock that are issuable pursuant to the Warrants. As
of the date hereof, except as otherwise described in Schedule "A" attached
12
hereto, the Company has not issued or agreed to issue any stock purchase rights
or convertible securities (other than this Warrant), and there are no preemptive
rights in effect with respect to the issuance of any shares of Common Stock. All
the outstanding shares of Common Stock have been validly issued without
violation of any preemptive or similar rights, are fully paid and nonassessable
and have been issued in compliance with all federal and applicable state
securities laws.
(b) Authority. The Company has full corporate power and
authority to execute and deliver this Warrant, to issue the shares of Common
Stock issuable upon exercise of this Warrant, and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof has
been duly authorized by all necessary corporate action on its part. This Warrant
has been duly executed on behalf of the Company and constitutes the legal, valid
and binding obligation of the Company enforceable in accordance with its terms.
(c) No Legal Bar. Neither the execution, delivery or
performance of this Warrant nor the issuance of the shares of Common Stock
issuable upon exercise of this Warrant will (a) conflict with or result in a
violation of the Certificate of Incorporation or By-Laws of the Company, (b)
conflict with or result in a violation of any law, statute, regulation, order or
decree applicable to the Company or any affiliate, (c) require any consent or
authorization or filing with, or other act by or in respect of any governmental
authority, or (d) to the Company's knowledge after reasonable inquiry result in
a breach of, constitute a default under or constitute an event creating rights
of acceleration, termination or cancellation under any mortgage, lease,
contract, franchise, instrument or other material agreement to which the Company
is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
Warrant as contemplated herein, the Warrant Shares will have been validly issued
and will be fully paid and nonassessable. On the date hereof, the par value of
the Common Stock is less than the Exercise Price per share of Common Stock.
13. Representations and Warranties of the Warrantholder. This
Warrantholder warrants and covenants as follows:
(i) Investment Purpose. This Warrant and the
Warrant Shares will be acquired for investment for the Warrantholder's own
account, and not as a nominee or agent and not with a view toward or in
connection with to the sale or distribution of any part thereof, and the
Warrantholder has no present intention of selling, granting any participation in
or otherwise distributing the same. The Warrantholder further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person, or to any third
person, with respect to this Warrant.
(ii) Private Issue. The Warrantholder
understands (i) that the Warrant and the Warrant Shares issuable upon exercise
of this Warrant are not registered under the Securities Act, (ii) or qualified
under applicable state securities laws. Warrantholder understands that it must
bear the economic risk of this investment until such time as the Warrant Shares
are registered for resale pursuant to the Securities Act or an exemption for
such registration is available. (iii) Reliance on Exemptions. Warrantholder
understands that the Warrant and Warrant Shares are being offered and sold in
reliance on specific exemptions from registration requirements of the United
States federal and state Securities Laws and the Company shall rely upon the
truth and accuracy of, and Warrantholder's compliance with, the representations,
warranties, agreements, acknowledgements and understandings as set forth herein
in order to determine the availability of such exemptions and the eligibility of
Warrantholder to purchase the Warrant Shares.
13
(iv) Legends. Warrantholder understands,
certificates for the Warrant Shares, and until such time as the Warrant Shares
have been registered under the Securities Act or may be sold pursuant to Rule
144 or otherwise, without registration, will bear a restrictive legend (the
"Legend"):
[THE SECURITIES REPRESENTED BY THIS CERTFICIATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS
OFFERED, SOLD OR OTHERWISE TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.]
(v) Disposition of Warrantholder's Rights. In
no event will the Warrantholder make a disposition of the Warrant Shares
issuable upon exercise of this Warrant unless and until (i) it shall have
notified the Company of the proposed disposition, and (ii) if requested by the
Company, it shall have furnished the Company with an opinion of counsel
satisfactory to the Company and its counsel to the effect that (A) appropriate
action necessary for compliance with the Securities Act has been taken, or (B)
an exemption from the registration requirements of the Securities Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of the Warrant Shares shall terminate as to this Warrant and any
particular share of Common Stock when (1) such security shall have been
effectively registered under the Securities Act and sold by the Holder thereof
in accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the Securities Act, or
(3) a letter shall have been issued to the Warrantholder at its request by the
staff of the Securities and Exchange Commission or a ruling shall have been
issued to the Warrantholder at its request by such Commission stating that no
action shall be recommended by the staff or taken by such Commission, as the
case may be, if such security is transferred without registration under the
Securities Act in accordance with the conditions set forth in such letter or
ruling and such letter or ruling specifies that no subsequent restrictions on
transfer are required. Whenever the restrictions imposed hereunder shall
terminate, as hereinabove provided, the Warrantholder or the Holder with respect
to such Warrant Share shall be entitled to receive from the Company, without
expense to such Holder, one or more new certificates for the Warrant or for such
shares of Common Stock not bearing the Legend.
(vi) Rule 144. The Warrantholder acknowledges
that it has received and reviewed a copy of Rule 144 promulgated under the
Securities Act, which permits limited public resales of securities acquired in a
non-public offering, subject to the satisfaction of certain conditions.
14
(vii) Sale of Warrant. The Warrantholder
acknowledges that in the event the applicable requirements of Rule 144 are not
met, registration under the Securities Act or compliance with another exemption
from registration will be required for any disposition of this Warrant or the
Warrant Shares. The Warrantholder understands that although Rule 144 is not
exclusive, the Securities and Exchange Commission has expressed its opinion that
persons proposing to sell restricted securities received in a private offering
other than in a registered offering or pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales and that such persons and the brokers who
participate in the transactions do so at their own risk. The Warrantholder also
acknowledges that it is not receiving any rights with respect to registration of
this Warrant or the Warrant Shares under the Securities Act.
(viii) Financial Risk. The Warrantholder
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment, and has the
ability to bear the economic risks of its investment.
(ix) Accredited Investor. The Warrantholder
is an "accredited investor" within the meaning of Rule 501 of Regulation D
promulgated under the Act.
(x) No Public Market. The Warrantholder
understands that no public market now exists for any of the securities issued by
the Company.
(xi) Receipt of Information. The Warrantholder
has received and reviewed this Warrant; it, its attorney and its accountant have
been furnished or given access to, and an opportunity to review all documents
and other materials relating to the sale of Warrants and requested of, the
Company; it and they have been given an opportunity to ask any and all questions
or, and receive answers from, the Company concerning the terms and conditions of
this Warrant and to evaluate the suitability of an investment in this Warrant;
and, in evaluating the suitability of an investment in this Warrant; it and they
have not relief upon any representations or other information (whether oral or
written) other than as set forth herein. Neither such inquiries nor review or
investigation by Warrantholder or its representatives shall modify, amend or
affect any parties' right to rely on the representations and warranties
hereunder.
14. Miscellaneous Provisions.
(a) Governing Law. This Warrant shall be deemed to have been
made in the State of California and the validity of this Warrant, the
construction, interpretation, and enforcement thereof, and the rights of the
parties thereto shall be determined under, governed by, and construed in
accordance with the internal laws of the State of California, without regard to
principles of conflicts of law.
15
(b) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given when personally
delivered to the addressee or five (5) days after being mailed by certified
mail, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Company:
SOFTNET SYSTEMS, INC.
000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attn:Chief Financial Officer
To the Warrantholders
Or holder of Warrant Shares:
FINOVA Capital Corporation .
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Attn: ________________________
provided, however, that any notice of change of address shall be effective five
(5) days after receipt.
(c) Successors and Assigns. This Warrant shall be binding upon
and inure to the benefit of the Company, the Warrantholders and the holders of
Warrant Shares and the successors, assigns and transferees of the Company, the
Warrantholders and the holders of Warrant Shares. This Warrant is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(d) Attorneys' Fees. The Company agrees to pay, on demand, all
attorneys' fees (include attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code) and all other costs and expenses which may be
incurred by the Warrantholders and the holders of Warrant Shares in connection
with any amendment to this Warrant which may be requested by the Company and/or
in any action or proceeding in which the Company is not the prevailing party, if
such action or proceeding is in connection with, arising out of, or
consequential to the protection, assertion, or enforcement of rights under this
Warrant.
(e) Entire Agreement; Amendments and Waivers. This Warrant
sets forth the entire understanding of the parties with respect to the
transactions contemplated hereby. The failure of any party to seek redress for
the violation or to insist upon the strict performance of any term of this
Warrant shall not constitute a waiver of such term and such party shall be
entitled to enforce such term without regard to such forbearance. This Warrant
may be amended, the Company may take any action herein prohibited or omit to
take action herein required to be performed by it, and any breach of or
compliance with any covenant, agreement, warranty or representation may be
waived, only if the Company has obtained the written amendments, written consent
or written waiver of the majority in interest of the Warrantholders, and then
such consent or waiver shall be effective only in the specific instance and for
the specific purpose for which given.
16
(f) Severability. If any term of this Warrant as applied to
any person or to any circumstance is prohibited, void, invalid or unenforceable
in any jurisdiction, such term shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or invalidity without in any way affecting any
other term of this Warrant or affecting the validity or enforceability of the
remainder of this Warrant or of such provision in any other jurisdiction.
(g) Headings. The headings in this Warrant are inserted only
for convenience of reference and shall not be used in the construction of any of
its terms.
(h) Transferability. This Warrant may be assigned, transferred
or sold by Warrantholder only in compliance with the provisions of applicable
securities laws and with the consent of Company which shall not be unreasonably
withheld; provided, however, that no consent of the Company shall be required
for any assignment or transfer of this Warrant to any direct or indirect
subsidiary or parent of the Warrantholders or to any entity in which
Warrantholder has a 50% or greater ownership interest.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers effective as of the 22nd day of March, 1999.
SOFTNET SYSTEMS, INC.
a New York corporation
By:/s/ Xxxx Xxxx Xxxxxxxx
----------------------
Printed Name: Xxxx Xxxx Xxxxxxxx
Title: Treasurer
