THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR
EXERCISED UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN
CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
HOLDERS MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND
ASSESSMENT OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER
THAT CERTAIN INVESTMENT AGREEMENT BY AND BETWEEN THE COMPANY AND HOLDER
REFERENCED THEREIN AS EXHIBIT J.
Warrant to Purchase
"N" shares Warrant Number ____
Warrant to Purchase Common Stock
of
Guinness Telli*Phone Corporation
THIS CERTIFIES that Xxxxxx Private Equity, LLC or any subsequent holder
hereof ("Holder"), has the right to purchase from Guinness Telli*Phone
Corporation, a Nevada corporation (the "Company"), up to "N" fully paid
and nonassessable shares, wherein "N" is defined below, of the
Company's common stock, $0.001 par value per share ("Common Stock"),
subject to adjustment as provided herein, at a price equal to the
Exercise Price as defined in Section 3 below, at any time beginning on
the Date of Issuance (defined below) and ending at 5:00 p.m., New York,
New York time the date that is five (5) years after the Date of
Issuance (the "Exercise Period"); provided, that, with respect to each
"Put," as that term is defined in that certain Investment Agreement
(the "Investment Agreement") by and between the initial Holder and
Company, dated on or about April 24, 2000, "N" shall equal ten percent
(10%) of the number of shares of Common Stock purchased by the Holder
in that Put.
Holder agrees with the Company that this Warrant to Purchase Common
Stock of the Company (this "Warrant") is issued and all rights
hereunder shall be held subject to all of the conditions, limitations
and provisions set forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on _____________, ______
("Date of Issuance"). The term of this Warrant is five (5) years from
the Date of Issuance.
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may
be exercised as to all or any lesser number of full shares of Common
Stock covered hereby
Exhibit D
(the "Warrant Shares") upon surrender of this Warrant, with the
Exercise Form attached
hereto as Exhibit A (the "Exercise Form") duly completed and executed,
together with the full Exercise Price (as defined below) for each share
of Common Stock as to which this Warrant is exercised, at the office of
the Company, Attention: Xxxxxxxx Xxxxxxxx, President & CEO;655 Redwood
Hwy., #111; Xxxx Xxxxxx, XX 00000 Telephone: (000) 000-0000, Facsimile:
(000) 000-0000, or at such other office or agency as the Company may
designate in writing, by overnight mail, with an advance copy of the
Exercise Form sent to the Company and its Transfer Agent by facsimile
(such surrender and payment of the Exercise Price hereinafter called
the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed
Exercise Form is sent by facsimile to the Company, provided that the
original Warrant and Exercise Form are received by the Company as soon
as practicable thereafter. Alternatively, the Date of Exercise shall
102
be defined as the date the original Exercise Form is received by the
Company, if Holder has not sent advance notice by facsimile. The
Company shall not be required to deliver the shares of Common Stock to
the Holder until the requirements of Section 2(a) above are satisfied.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of
Exercise, Holder shall be entitled to receive Common Stock for the
number of shares purchased upon such Exercise of this Warrant, and if
this Warrant is not exercised in full, Holder shall be entitled to
receive a new Warrant (containing terms identical to this Warrant)
representing any unexercised portion of this Warrant in addition to
such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the
Holder of record of such shares on the Date of Exercise of this
Warrant, irrespective of the date of delivery of the Common Stock
purchased upon the Exercise of this Warrant. Nothing in this Warrant
shall be construed as conferring upon Holder any rights as a
stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price"), shall initially equal $Y per
share ("Initial Exercise Price"), where "Y" shall equal 110% of the
Market Price for the applicable Put (as both are defined in the
Investment Agreement) or, if the Date of Exercise is more than six (6)
months after the Date of Issuance, the lesser of (i) the Initial
Exercise Price or (ii) the "Lowest Reset Price," as that term is
defined below. The Company shall calculate a "Reset Price" on each
six-month anniversary date of the Date of Issuance which shall equal
one hundred and ten percent (110%) of the average closing bid price of
the Common Stock for the five (5) trading days ending on such six-month
anniversary date of the Date of Issuance. The "Lowest Reset Price"
shall equal the lowest Reset Price determined on any six-month
anniversary date of the Date of Issuance preceding the Date of
Exercise, taking into account, as appropriate, any adjustments made
pursuant to Section 5 hereof.
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer;
or
(ii) Cashless Exercise: subject to the last sentence of this
Section 3, surrender of this Warrant at the principal office of the
Company together with notice of cashless election, in which event the
Company shall issue Holder a number of shares of Common
Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for purposes of
this Section 3(ii), the "Market Price" shall be defined as the average
Closing Price of the Common Stock for the five (5) trading days prior
to the Date of Exercise of this Warrant (the "Average Closing Price"),
as reported by the O.T.C. Bulletin Board, National Association of
Securities Dealers Automated Quotation System ("Nasdaq") Small Cap
Market, or if the Common Stock is not traded on the Nasdaq Small Cap
Market, the Average Closing Price in any other over-the-counter market;
provided, however, that if the Common Stock is listed on a stock
exchange, the Market Price shall be the Average Closing Price on such
exchange for the five (5) trading days prior to the date of exercise of
the Warrants. If the Common Stock is/was not traded during the five
(5) trading days prior to the Date of Exercise, then the closing price
for the last publicly traded day shall be deemed to be the closing
price for any and all (if applicable) days during such five (5) trading
day period.
B = the Exercise Price.
103
For purposes hereof, the term "Closing Bid Price" shall mean the
closing bid price on the O.T.C. Bulletin Board, the National Market
System ("NMS"), the New York Stock Exchange, the Nasdaq Small Cap
Market, or if no longer traded on the O.T.C. Bulletin Board, the NMS,
the New York Stock Exchange, the Nasdaq Small Cap Market, the "Closing
Bid Price" shall equal the closing price on the principal national
securities exchange or the over-the-counter system on which the Common
Stock is so traded and, if not available, the mean of the high and low
prices on the principal national securities exchange on which the
Common Stock is so traded.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is
intended, understood and acknowledged that the Common Stock issuable
upon exercise of this Warrant in a cashless exercise transaction shall
be deemed to have been acquired at the time this Warrant was issued.
Moreover, it is intended, understood and acknowledged that the holding
period for the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction shall be deemed to have commenced on the
date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant
may not be exercised in a cashless exercise transaction if, on the Date
of Exercise, the shares of Common Stock to be issued upon exercise of
this Warrant would upon such issuance be then registered pursuant to an
effective registration statement filed pursuant to that certain
Registration Rights Agreement dated on or about April 24, 2000 by and
among the Company and certain investors, or otherwise be registered
under the Securities Act of 1933, as amended.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company,
in whole or in part, in person or by attorney, upon surrender of this
Warrant properly completed and endorsed. This Warrant shall be
canceled upon such surrender and, as soon as practicable thereafter,
the person to whom such transfer is made shall be entitled to receive a
new Warrant or Warrants as to the portion of this Warrant transferred,
and Holder shall be entitled to receive a new Warrant as to the portion
hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the
exercise of this Warrant constitutes "Registrable Securities" under
that certain Registration Rights Agreement dated on or about April 24,
2000 between the Company and certain investors and, accordingly, has
the benefit of the registration rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then Holder, upon Exercise
of this Warrant after the record date for the determination of holders
of Common Stock entitled to receive such dividend, shall be entitled to
receive upon Exercise of this Warrant, in addition to the number of
shares of Common Stock as to which this Warrant is exercised, such
additional shares of Common Stock as such Holder would have received
had this Warrant been exercised immediately prior to such record date
and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at
any time effect a recapitalization, reclassification or other similar
transaction of such character that the shares of Common Stock shall be
changed into or become exchangeable for a larger or smaller number of
shares, then upon the effective date thereof, the number of shares of
Common Stock which Holder shall be entitled to purchase upon Exercise
of this Warrant shall be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of shares
of Common Stock by reason of such recapitalization, reclassification or
similar transaction, and the Exercise Price shall be, in the case of an
increase in the number of shares, proportionally decreased and, in the
case of decrease in the number of shares, proportionally increased.
The Company shall give Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
104
(c) Distributions. If the Company shall at any time distribute for
no consideration to holders of Common Stock cash, evidences of
indebtedness or other securities or assets (other than cash dividends
or distributions payable out of earned surplus or net profits for the
current or preceding years) then, in any such case, Holder shall be
entitled to receive, upon Exercise of this Warrant, with respect to
each share of Common Stock issuable upon such exercise, the amount of
cash or evidences of indebtedness or other securities or assets which
Holder would have been entitled to receive with respect to each such
share of Common Stock as a result of the happening of such event had
this Warrant been exercised immediately prior to the record date or
other date fixing shareholders to be affected by such event (the
"Determination Date") or, in lieu thereof, if the Board of Directors of
the Company should so determine at the time of such distribution, a
reduced Exercise Price determined by multiplying the Exercise Price on
the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by
the Board of Directors of the Company in its discretion) and the
denominator of which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or
other similar event, as a result of which shares of Common Stock shall
be changed into the same or a different number of shares of the same or
another class or classes of stock or securities or other assets of the
Company or another entity or there is a sale of all or substantially
all the Company's assets (a "Corporate Change"), then this Warrant
shall be exerciseable into such class and type of securities or other
assets as Holder would have received had Holder exercised this Warrant
immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have
given thirty (30) days notice to Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in
Section 3 of this Warrant, until the occurrence of an event stated in
subsection (a), (b) or (c) of this Section 5, and thereafter shall mean
said price as adjusted from time to time in accordance with the
provisions of said subsection. No such adjustment under this Section 5
shall be made unless such adjustment would change the Exercise Price at
the time by $.01 or more; provided, however, that all adjustments not
so made shall be deferred and made when the aggregate thereof would
change the Exercise Price at the time by $.01 or more. No adjustment
made pursuant to any provision of this Section 5 shall have the net
effect of increasing the Exercise Price in relation to the split
adjusted and distribution adjusted price of the Common Stock. The
number of shares of Common Stock subject hereto shall increase
proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to
this Section 5, Holder shall, upon Exercise of this Warrant, become
entitled to receive shares and/or other securities or assets (other
than Common Stock) then, wherever appropriate, all references herein to
shares of Common Stock shall be deemed to refer to and include such
shares and/or other securities or assets; and thereafter the number of
such shares and/or other securities or assets shall be subject to
adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common
Stock. If, on Exercise of this Warrant, Holder would be entitled to a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon exercise shall be
the next higher number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance
such number of authorized and unissued shares of Common Stock (or other
securities substituted therefor as herein above provided) as shall be
sufficient for the Exercise of this Warrant and payment of the Exercise
Price. The Company covenants and agrees that upon the Exercise of this
105
Warrant, all shares of Common Stock issuable upon such exercise shall
be duly and validly issued, fully paid, nonassessable and not subject
to preemptive rights, rights of first refusal or similar rights of any
person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been issued
in a transaction exempt from the registration requirements of the Act
by virtue of Regulation D and exempt from state registration under
applicable state laws. The Warrant and the Common Stock issuable upon
the Exercise of this Warrant may not be pledged, transferred, sold or
assigned except pursuant to an effective registration statement or an
exemption to the registration requirements of the Act and applicable
state laws.
(b) Assignment. If Holder can provide the Company with reasonably
satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell,
transfer, assign, pledge or otherwise dispose of this Warrant, in whole
or in part. Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit
B, indicating the person or persons to whom the Warrant shall be
assigned and the respective number of warrants to be assigned to each
assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person
other than the Company and Holder any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by
and construed in accordance with the laws of the state of Georgia,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction
or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the
Company, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver a new Warrant of like
tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by
Holder to or on the Company shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage
prepaid, and addressed, until another address is designated in writing
by the Company, to the address set forth in Section 2(a) above. Notices
or demands pursuant to this Warrant to be given or made by the Company
to or on Holder
[INTENTIONALLY LEFT BLANK]
shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, to the
address of Holder set forth in the Company's records, until another
address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
_____ day of ________________, _____.
106
GUINNESS TELLI*PHONE CORPORATION
By: ________________________________
Xxxxxxxx X. Guinness, President & CEO
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: GUINNESS TELLI*PHONE CORPORATION
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of
Guinness Telli*Phone Corporation, a Nevada corporation (the "Company"),
evidenced by the attached warrant (the "Warrant"), and herewith makes
payment of the exercise price with respect to such shares in full, all
in accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any of the Common Stock obtained on exercise of the Warrant,
except in accordance with the provisions of Section 8(a) of the
Warrant.
2. The undersigned requests that stock certificates for such shares be
issued free of any restrictive legend, if appropriate, and a warrant
representing any unexercised portion hereof be issued, pursuant to the
Warrant in the name of the undersigned and delivered to the undersigned
at the address set forth below:
Dated:
__________________________________________________________________
Signature
__________________________________________________________________
Print Name
__________________________________________________________________
Address
__________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to the
name as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change whatsoever.
__________________________________________________________________
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or
persons below named the right to purchase _______ shares of the Common
Stock of Guinness Telli*Phone Corporation, evidenced by the attached
Warrant and does hereby irrevocably constitute and appoint
_______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: _________ ______________________________
Signature
Fill in for new registration of Warrant:
___________________________________
Name
___________________________________
Address
107
___________________________________
Please print name and address of assignee
(including zip code number)
__________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
__________________________________________________________________
