[On PlayNet Technologies, Inc. Letterhead]
Xxxxxx Xxxxx
President and
Chief Executive Officer
December 30, 1996
Confidential
------------
Xx. Xxxxx Xxxxxxxxx
Managing Director
Xxxxx & Company Incorporated
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
And To All Other Investors Who Purchase
Senior Secured Notes as Listed on Schedule 1
Ladies and Gentlemen:
This letter shall confirm the terms and conditions which have been agreed
between Xxxxx & Company Incorporated ("Xxxxx"), PlayNet Technologies, Inc.
("PlayNet") and other investors who purchase Senior Secured Notes (as defined
herein) with respect to the purchase by Xxxxx, Xxxxxx Xxxxx (who will purchase
either directly or indirectly) ("Xxxxx") and the other investors listed on
Schedule 1 hereto of certain senior secured notes in form and substance as
provided in Exhibit 2 attached hereto (the "First Stage Notes"), which First
Stage Notes are to be issued by PlayNet as part of a privately-placed bridge
financing transaction or series of such transactions raising gross proceeds of
at least $3 million to PlayNet (the "Initial Bridge Financing").
In the event that subsequent to the consummation of the Initial Bridge
Financing, PlayNet requires additional financing to continue its operations, or
fails to consummate a Qualified Public Offering or a Qualified Private
Placement, as defined herein, or fails to acquire other permanent financing
mutually agreeable to PlayNet and Xxxxx, PlayNet agrees and covenants that it
will conduct, pursuant to the terms and conditions of this Agreement, a
second-stage bridge financing transaction or series of transactions (the "Second
Stage Bridge Financing") under which PlayNet will offer certain senior secured
notes in form and substance identical to the First Stage Notes and that the
offer of such second stage senior secured notes (the "Second Stage Notes") will
provide PlayNet with gross proceeds of at least $15 million. For purposes
hereof, the Initial Bridge Financing and the Second Stage Bridge Financing
collectively shall be referred to as the "Bridge Financing" and the First Stage
Notes and the Second Stage Notes shall be collectively referred to as the
"Senior Secured Notes".
Bridge Financing Letter Agreement
December 30, 1996
Page 2
PlayNet agrees and covenants that the Bridge Financing shall be made pursuant to
one or more exemptions from registration under the Securities Act of 1933, as
amended (the "Securities Act") and any and all applicable securities laws of any
state or other jurisdiction (the "Blue Sky Laws").
1. Initial Bridge Financing
------------------------
In order to complete the currently proposed public offering of common stock of
PlayNet, par value $.001 per share ("Common Stock") raising gross proceeds of a
minimum of $15 million, which public offering is described in that certain
Registration Statement on Form S-1 filed with the U.S. Securities and Exchange
Commission (the "SEC") on October 16, 1996, as may be amended and/or
supplemented (the "Public Offering") certain operational hurdles, as set forth
on Exhibit 1 attached hereto and as may be reasonably modified from time to time
upon the agreement of PlayNet and Xxxxx (the "Operational Hurdles") should be
attained by PlayNet on or before January 31, 1997, or such other date as may be
mutually agreed from time to time between PlayNet and the underwriter of the
Public Offering (the "Hurdle Date"). PlayNet believes that it can meet the
Operational Hurdles by the Hurdle Date. However, it is agreed by Xxxxx and
PlayNet that if the Operational Hurdles are not achieved in their entirety by
the Hurdle Date, it will be the sole decision of PlayNet's management as to
whether it should proceed with the Public Offering.
It is currently the intention of PlayNet to consummate the Public Offering on or
before March 31, 1997. In connection therewith, Xxxxx hereby agrees that based
upon its discussions with PlayNet of PlayNet's current and contemplated business
and financial condition, and subject to (a) PlayNet's meeting its Operational
Hurdles by the Hurdle Date, (b) the existence of market conditions favorable to
a public offering of PlayNet Common Stock pursuant to the terms of the Public
Offering, and (c) the receipt by PlayNet of all regulatory approvals required
for consummation of the Public Offering (including, but not limited to, the
receipt of the approval of the SEC), it is Xxxxx'x present intention to
diligently proceed to assemble an underwriting group in order to effect the
Public Offering.
In order to meet the operational financing needs of PlayNet until the Hurdle
Date, PlayNet will require a minimum of $3 million in temporary financing to be
raised in the Initial Bridge Financing. PlayNet covenants to use the proceeds of
the Initial Bridge Financing to finance normal business operations of PlayNet
for the period up to and including January 31, 1997.
The aggregate principal amount of First Stage Notes to be offered as part of the
Initial Bridge Financing shall be a minimum of $3 million (the "Aggregate
Principal Amount"), and of such Aggregate Principal Amount, PlayNet agrees to
offer First Stage Notes (in the form and substance of the senior secured note
provided in Exhibit 2 attached hereto) as follows:
principal amount of $750,000 to Xxxxx
principal amount of $750,000 to Xxxxx
principal amount of $750,000 to a Third Party Investor, as defined below
principal amount of $750,000 to a PlayNet Third Party Investor, as defined
below
Each of Xxxxx and Xxxxx hereby agree to purchase, subject to the terms and
conditions hereof, First Stage Notes in the principal amounts set forth
immediately above.
Bridge Financing Letter Agreement
December 30, 1996
Page 3
As used herein, "Third Party Investor" shall mean a third party investor
identified by Xxxxx; and "PlayNet Third Party Investor" shall mean a third party
investor identified by PlayNet and/or Xxxxxx Xxxxx. By his signature hereto,
Xxxxx agrees and covenants that in the event that PlayNet requires the temporary
financing provided by the sale of $750,000 principal amount of First Stage Notes
to a PlayNet Third Party Investor on or before January 31, 1997 and either a
PlayNet Third Party Investor or another third party investor identified by Xxxxx
does not consummate the purchase of such First Stage Notes by such date, then
Xxxxx shall purchase such fourth First Stage Notes on or prior to such date.
Xxxxx, Xxxxx and PlayNet agree and covenant that:
(i) to the extent any Third Party Investor or any PlayNet Third Party Investor
purchases more than an aggregate principal amount of $750,000 of First
Stage Notes, then the amount which is in excess of such aggregate $750,000
up to a maximum prepayment amount of $250,000 (the "Maximum Prepayment
Amount") shall be applied by PlayNet as a prepayment under any First Stage
Note held by Xxxxx;
(ii) to the extent any Third Party Investor or any PlayNet Third Party Investor
purchases more than an aggregate principal amount of $750,000 of First
Stage Notes and any such amount in excess thereof has first been applied
toward the repayment of the Xxxxx First Stage Notes as referred to in (i)
above, any residual excess principal amount thereof up to the Maximum
Prepayment Amount may be applied by PlayNet toward the repayment of the
Xxxxx First Stage Notes up to the Maximum Prepayment Amount; and
(iii)in the event that any amount remains in excess of the aggregate $750,000
principal amount of First Stage Notes to be purchased by any Third Party
Investor or any PlayNet Third Party Investor after prepayments have been
made in accordance with (i) and (ii) above, or if PlayNet elects not to
make the prepayment to Xxxxx permitted in accordance with (ii) above, then
any such residual amount shall remain the property of PlayNet;
provided, however, that in the event that any such Third Party Investor or
PlayNet Third Party Investor is IBM, or IBM separately makes a strategic or
other investment in PlayNet in any principal amount, any such excess or separate
investment by IBM shall remain the property of PlayNet and there shall be no
reduction in the Xxxxx or Xxxxx First Stage Notes, unless PlayNet, in its sole
discretion, elects to prepay any of the First Stage Notes pursuant to the terms
of the Senior Secured Notes. In the event that PlayNet elects such prepayment,
PlayNet agrees and acknowledges that such prepayment shall be made to each of
Xxxxx and Xxxxx in equal amounts and that such prepayment amount shall not be
applied in its entirety solely to the prepayment of the First Stage Notes of
either Xxxxx or Xxxxx.
As a material part of the consideration for the purchase of First Stage Notes by
Xxxxx, any Third Party Investor and any PlayNet Third Party Investor and in
order to induce Xxxxx, any Third Party Investor and any PlayNet Third Party
Investor to purchase First Stage Notes, PlayNet shall issue at the closing of
each such purchase to Xxxxx, any Third Party Investor and any PlayNet Third
Party Investor a warrant to purchase shares of Common Stock of PlayNet in form
and substance identical to the warrant attached hereto as Exhibit 3. As a
material part of the consideration for the purchase of First Stage Notes by
Xxxxx and in order to induce
Bridge Financing Letter Agreement
December 30, 1996
Page 4
Xxxxx to purchase First Stage Notes, PlayNet shall issue at the closing of such
purchase to Xxxxx a warrant to purchase shares of Common Stock of PlayNet in
form and substance identical to the warrant attached hereto as Exhibit 4.
In the event that in connection with Xxxxx'x role as an underwriter of the
Public Offering, Xxxxx is required by the National Association of Securities
Dealers, Inc. ("NASD") to modify the number or exercise price of the warrants
issued to Xxxxx xxxxxxxxx, Xxxxx shall use its best efforts within a reasonable
period of time mutually satisfactory to PlayNet and Xxxxx to reach agreement
with the NASD on such modification(s) so that they shall occur in such a manner
as to not effect the Public Offering or Xxxxx'x ability to act as an underwriter
of the Public Offering. Additionally, Xxxxx shall use its best efforts in its
negotiations with the NASD to ensure that any such modification(s) shall not
have any effect on any warrant issued hereunder to Xxxxx, any Third Party
Investor or any PlayNet Third Party Investor.
It is agreed that Xxxxx and Xxxxx will purchase their Senior Secured Notes
contemporaneously with the execution of this Agreement, will close on the Third
Party Investor Senior Secured Note, on a best efforts basis, no later than
January 17, 1997, and will close on the PlayNet Third Party Investor Senior
Secured Note, if required (as specified above), on or before January 31, 1997.
It is further agreed that in the event that any terms or conditions of the First
Stage Notes require adjustment in order to secure the purchase of a First Stage
Note by either a Third Party Investor or a PlayNet Third Party Investor, then
the terms and conditions of all Senior Secured Notes shall be so adjusted and
modified pari passu.
2. Second-Stage Bridge Financing
-----------------------------
In the event that subsequent to the consummation of the Initial Bridge
Financing, PlayNet requires additional financing to continue its operations and
none of a Qualified Public Offering or a Qualified Private Placement (each as
defined below) or the acquisition of other permanent financing mutually
agreeable to PlayNet and Xxxxx have been consummated, PlayNet will conduct the
Second Stage Bridge Financing, through which it will offer Second Stage Notes,
and PlayNet and Xxxxx agree to, on a best efforts basis, proceed with the Second
Stage Bridge Financing.
The Second Stage Bridge Financing will be conducted in three tranches, with each
tranche raising gross proceeds of $5 million. The Second Stage Notes shall have
terms and conditions identical to the First Stage Notes and shall be in the form
and substance of the senior secured note attached hereto as Exhibit 2.
As a material part of the consideration for the purchase of the first tranche of
Second Stage Notes by any purchaser thereof and in order to induce the purchaser
thereof to purchase such Second Stage Notes, PlayNet shall issue to such
purchaser, at the closing of the purchase of the first tranche of Second Stage
Notes, a warrant to purchase shares of Common Stock of PlayNet in form and
substance identical to the warrant attached hereto as Exhibit 5. As a material
part of the consideration for the purchase of the second tranche of Second Stage
Notes by any purchaser thereof and in order to induce the purchaser thereof to
purchase such Second Stage Notes, PlayNet shall issue to such purchaser, at the
closing of the purchase of the second tranche of Second Stage Notes, a warrant
to purchase shares of Common Stock
Bridge Financing Letter Agreement
December 30, 1996
Page 5
of PlayNet in form and substance identical to the warrant attached hereto as
Exhibit 6. As a material part of the consideration for the purchase of the third
tranche of Second Stage Notes by any purchaser thereof and in order to induce
the purchaser thereof to purchase such Second Stage Notes, PlayNet shall issue
to such purchaser, at the closing of the purchase of the third tranche of Second
Stage Notes, a warrant to purchase shares of Common Stock of PlayNet in form and
substance identical to the warrant attached hereto as Exhibit 7.
PlayNet hereby covenants that, upon the closing of the first tranche of the
Second Stage Bridge Financing, all First Stage Notes will be prepaid by PlayNet.
Xxxxx hereby agrees that upon the prepayment of its First Stage Note it will
purchase an aggregate principal amount of Second Stage Notes in the first
tranche of the Second Stage Bridge Financing equal to the aggregate principal
amount of the First Stage Note prepaid by PlayNet hereunder.
In addition, PlayNet agrees that (a) as a condition to the closing of the second
tranche of the Second-Stage Bridge Financing, the membership of the Board of
Directors of PlayNet shall consist of the current and existing directors plus
two (2) outside independent directors (a total of 5 directors), and (b) as a
condition to the closing of the third tranche of the Second-Stage Bridge
Financing, Xxxxx shall have the right to appoint one member of the Board of
Directors, resulting in a total of 6 directors, provided, however, that the
Xxxxx appointee shall be either Xx. Xxxxx Xxxxxxxxx, Managing Director of Xxxxx,
or such other outside individual selected by Xxxxx, but reasonably satisfactory
to PlayNet and Xxxxx.
3. Terms of the Senior Secured Notes
---------------------------------
The Senior Secured Notes evidencing the Initial Bridge Financing and the Second
Stage Bridge Financing shall bear interest at the rate of twelve percent (12%)
per annum payable upon the Maturity Date. Each Senior Secured Note shall rank
pari passu in respect of all other Senior Secured Notes and all shall
collectively be senior to any and all future and to all pre-existing
indebtedness of PlayNet.
The Senior Secured Notes shall each mature and be due and payable on the earlier
of (a) the closing of any Qualified Public Offering or Qualified Private
Placement, each as defined below, or (b) one (1) year from the date hereof (the
"Maturity Date"). As used herein, (i) a "Qualified Public Offering" shall mean
the closing of any public offering of at least $15 million in Common Stock of
PlayNet, and (ii) a "Qualified Private Placement" shall mean the closing of any
privately arranged financing transaction or series of transactions raising
aggregate proceeds of at least $15 million.
4. Representations, Warranties and Covenants of PlayNet
----------------------------------------------------
To induce Xxxxx, all Third Party Investors and all PlayNet Third Party Investors
and all other investors to purchase the Senior Secured Notes evidencing the
Initial Bridge Financing and the Second-Stage Bridge Financing, PlayNet hereby
makes the following representations, warranties, and covenants:
Bridge Financing Letter Agreement
December 30, 1996
Page 6
A. Payment and Performance of Obligations. PlayNet shall pay all amounts
due under the Senior Secured Notes when due and shall promptly, punctually, and
faithfully perform each and all of its obligations under the Senior Secured
Notes and this Agreement.
B. Due Organization and Corporate Authorization. PlayNet is a duly
organized, validly existing corporation in good standing in the state of its
incorporation and is, and shall hereafter remain, duly qualified and in good
standing in every state in which, by reason of the nature or location of
PlayNet's assets or operation of PlayNet's business, such qualification may be
necessary and where the failure to so qualify would have a material adverse
affect on (i) the financial condition of PlayNet, and/or (ii) PlayNet's ability
to conduct its business. The execution and delivery of this Agreement and of any
other documents, instruments, and agreements executed in connection herewith
constitute representations by the individual signing this Agreement and said
instruments and by PlayNet that such execution and delivery have received all
such corporate authorization as may be necessary to permit such execution and
delivery to, and that they do, bind PlayNet, except as such enforceability may
be limited by (i) bankruptcy, insolvency, reorganization or other similar laws
and legal and equitable principles limiting or affecting the rights of creditors
generally and/or (ii) general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
C. No Conflicting Agreements. There is no provision in the Articles of
Incorporation or By-laws or other organizational documents of PlayNet, or in any
document by which PlayNet may be bound which prohibits or adversely affects the
execution and delivery of this Agreement, or of any other instrument, document
or agreement executed in connection herewith, which prohibits or adversely
affects PlayNet's carrying out of the terms hereof or thereof.
D. Statutory Compliance. To the best of its knowledge and belief, PlayNet
is in compliance with, and shall hereafter comply with and use its assets in
compliance with, all statutes, regulations and orders of every federal, state,
municipal, and other governmental authority which has or claims jurisdiction
over PlayNet, PlayNet's assets, or any person in any capacity for which PlayNet
would be responsible for the conduct of such person, which if PlayNet is not so
in compliance would have a material adverse effect upon PlayNet's financial
condition or its ability to conduct its business as such business is presently
conducted.
E. Pay Taxes. PlayNet has paid, and hereafter shall pay as they become due
and payable, all taxes and unemployment contributions and other charges of any
kind or nature levied, assessed or claimed against PlayNet by any person or
entity whose claim could result in a lien upon the assets of PlayNet or by any
governmental authority. PlayNet has, and hereafter shall, properly exercise any
trust responsibilities imposed upon PlayNet by reason of withholding from
employees' pay and has timely filed, and shall timely file, all tax and other
returns and other reports with each governmental authority to whom PlayNet is
obligated so to file.
F. Litigation. Except as set forth in the Registration Statement relating
to the Public Offering, or otherwise disclosed in writing to investors of Senior
Secured Notes hereunder, there is not presently pending or, to PlayNet's best
knowledge and belief after due inquiry, threatened by or against PlayNet any
suit, action, proceeding or investigation which, if
Bridge Financing Letter Agreement
December 30, 1996
Page 7
determined adversely to PlayNet, would have a material adverse effect upon
PlayNet's financial condition or ability to conduct its business as such
business is presently conducted.
G. Dividends or Investments. Until all amounts due under the Senior Secured
Notes hereunder shall have been paid in full, PlayNet shall not, except as
otherwise provided herein:
1. pay any dividend, other than a common stock dividend of PlayNet's
own capital stock;
2. redeem, retire, purchase, or acquire any of PlayNet's capital
stock;
3. except with the consent of Xxxxx, invest in or purchase any stock
or securities or rights to purchase any such stock or securities, of
any corporation or other entity;
4. except with the consent of Xxxxx, merge or consolidate or be merged
or consolidated with or into any other corporation or other entity; or
5. except as contemplated by the Public Offering, a Qualified Public
Offering, and the Qualified Private Placement, make any change in its
capital structure, whether by issuance of securities or otherwise,
which results in any adverse effect on PlayNet's ability to perform
its obligations hereunder or under the Senior Secured Notes or the
warrants related thereto.
H. Corporate Loans; Capitalization. PlayNet shall not make any loans or
advances to any individual, firm, corporation, or other entity including,
without limitation, any affiliate, officer, employee, director, shareholder, or
salesperson of any of PlayNet.
I. Line of Business. PlayNet shall not engage in any business other than
the business in which it is currently engaged.
J. Adequacy of Disclosure. 1. All financial statements furnished by PlayNet
to investors of Senior Secured Notes hereunder have been prepared in accordance
with generally accepted accounting principles (except that interim financial
statements exclude statements of cash flows and notes to financial statements)
consistently applied and fairly present the condition of PlayNet at the date(s)
thereof. Except for PlayNet's need for the additional working capital to be
provided hereby, there has been no change in the financial condition of PlayNet
since the date(s) of such financial statements, other than changes in the
ordinary course of business, which changes have not had a material adverse
effect on the business of PlayNet.
2. PlayNet does not have any material contingent liabilities pursuant
to the execution of guaranties or otherwise not noted in PlayNet's financial
statements furnished to the investors.
Bridge Financing Letter Agreement
December 30, 1996
Page 7
3. No document, instrument, agreement, or paper given to investors by
or on behalf of PlayNet in connection with its execution of this Agreement, when
taken together, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein not
misleading. There is no fact which has a material adverse effect on the
financial condition of PlayNet which has not been disclosed in writing to
investors.
K. Use of Proceeds, Budget. PlayNet confirms and warrants that all proceeds
from the purchase of Senior Secured Notes shall be used by it to finance
PlayNet's ongoing business operations in the ordinary course. PlayNet further
confirms and warrants that it will continue to update its budget forecast on a
monthly basis and provide a copy thereof to Xxxxx for informational purposes
only.
L. Senior Indebtedness. There is no indebtedness of PlayNet currently
outstanding which would be senior to, or pari passu with, the obligation of
PlayNet to repay any and all amounts due and owing under the Senior Secured
Notes. PlayNet further covenants that for so long as any amounts are due
thereunder, no indebtedness (other than ordinary course equipment financing)
shall be incurred by PlayNet which indebtedness would be senior to, or pari
passu with, the Senior Secured Notes.
M. Other Covenants. 1. PlayNet shall not indirectly do or cause to be done
any act which, if done directly by PlayNet, would breach any covenant contained
in this Agreement.
2. The representations, warranties and covenants included herein shall
be automatically reconfirmed by PlayNet at the time of the purchase of the First
Stage Notes and Second Stage Notes unless otherwise noted in writing by PlayNet
prior to such closing.
5. Concurrent Conditions
---------------------
Concurrent with the consummation of the purchase of each of the First Stage
Notes and Second Stage Notes, there shall be delivered to investors:
a. this Agreement, xxxx executed and delivered by PlayNet and the
purchasing investor;
b. the Senior Secured Notes in the aggregate principal amount invested
by each investor hereunder and the warrant relating to such Senior
Secured Notes each duly executed and delivered by PlayNet;
c. a favorable opinion of counsel for PlayNet addressed to the
investors and dated the date of the Senior Secured Notes issued
hereunder in the form of the opinion included as Exhibit 8 hereof;
d. a certificate of an authorized officer of PlayNet as to such
matters as the investors of the Senior Secured Notes may reasonably
request.
Bridge Financing Letter Agreement
December 30, 1996
Page 9
6. Default
-------
Upon the occurrence of any one or more of the Events of Default (as that term is
defined in the Senior Secured Notes), any and all amounts due to investors under
the Senior Secured Notes or otherwise hereunder shall become immediately due and
payable, without notice or demand.
7. Subordination
-------------
PlayNet hereby warrants and agrees that all obligations and indebtedness of
PlayNet of every kind and description whether now or hereafter existing, (the
"Subordinated Debt") shall, for so long as any amounts are due hereunder, be
subordinated to the indebtedness of PlayNet due to investors under the Senior
Secured Notes in such manner that no payment or security shall be paid by
PlayNet for or on account of the Subordinated Debt, other than trade claims and
equipment loans and leases payable in the ordinary course, until the
indebtedness owed to investors has been paid in full and the Senior Secured
Notes have been terminated or until PlayNet has obtained the specific written
consent of each holder of Senior Secured Notes.
8. Grant of Security Interest
--------------------------
To secure PlayNet's prompt, punctual, and faithful performance of all and each
of PlayNet's obligations hereunder and under the Senior Secured Notes, PlayNet
hereby grants to the holders of Senior Secured Notes a continuing first priority
security interest in and to, whether now owned or now due, or in which PlayNet
has an interest, or hereafter, at any time in the future, acquired, arising, or
to become due, or in which PlayNet obtains an interest, and all products,
proceeds, substitutions, and accessions of or to any of the following; all
accounts and accounts receivable; all inventory; all contract rights including
any of PlayNet's rights to receive any net proceeds arising out of or related to
any equity offerings of PlayNet; all general intangibles including, but not
limited to, all existing, pending and future intellectual property rights,
including but not limited to trademarks, tradenames, service marks, copyrights
and patents; all equipment; all goods; all fixtures; all chattel paper; and all
instruments, documents of title, documents, policies and certificates of
insurance, securities, deposits, deposit accounts, money, cash, or other
property (all of which, together with any other property in which the holders of
the Senior Secured Notes may in the future be granted a security interest, is
referred to herein as the "Collateral").
9. Miscellaneous
-------------
Notices. All notices and other correspondence to PlayNet in connection
with this Agreement shall be deemed effective upon mailing to PlayNet's address
as set forth herein, which address may be changed on seven (7) days written
notice given by PlayNet to holders of all Senior Secured Notes issued hereunder.
All notices and other correspondence to the holders of Senior Secured Notes by
PlayNet in connection with this Agreement shall be deemed effective upon receipt
by such holder at such holder's address as set forth on the signature page of
the Senior Secured Notes issued hereunder, or elsewhere as such holders may
specify from time to time in writing to PlayNet, and shall be sent by certified
mail, return receipt requested.
Bridge Financing Letter Agreement
December 30, 1996
Page 10
Severability. Any determination that any provision of this Agreement or
any application thereof is invalid, illegal or unenforceable in any respect in
any instance shall not affect the validity, legality or enforceability of such
provision in any other instance, or the validity, legality or enforceability of
any other provision of this Agreement.
Amendments. No modification, amendment or waiver of any provision of
this Agreement or of any provision of any other agreement between the parties
hereto is effective unless executed in writing by Xxxxx, PlayNet, Xxxxx and all
other investors hereunder. No failure by the holders of the Senior Secured Notes
to give notice to PlayNet of its having failed to observe and comply with any
warranty or covenant included herein shall constitute a waiver of such warranty
or covenant or the amendment of the within Agreement.
Costs and Expenses of this Agreement. PlayNet shall pay all expenses
(including reasonable fees and expenses for counsel to Xxxxx) incurred by Xxxxx
in connection with the preparation, negotiation and consummation of the
agreements contemplated by the Bridge Financing.
Governing Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity and performance, shall be
governed by the laws of the State of New York. Each of the parties hereto submit
themselves to the jurisdiction of the Courts of the State of New York for all
purposes with respect to this Agreement.
Indemnification. Except for claims brought or threatened against the
holders of Senior Secured Notes by shareholders of such holders, PlayNet shall
indemnify, defend, and hold such holders harmless of and from any claim brought
or threatened against such holders by PlayNet, or any other person (as well as
from attorneys' reasonable fees and expenses in connection therewith) on account
of such holder's relationship with PlayNet (each of which may be defended,
compromised, settled or pursued by such holders with counsel of such holder's
selection, but at the expense of PlayNet). The within indemnification shall
survive payment of the Senior Secured Notes issued under the Short Term Bridge
Financing or the Second Stage Bridge Financing and/or any termination, release
or discharge executed by such holders in favor of PlayNet.
Other Investors. The terms and conditions of this Agreement, and all
rights, privileges and obligations hereunder, shall apply to and bind any and
all investors who purchase Senior Secured Notes hereunder and who execute a
signature page in the form attached hereto as Schedule 2 and who receive a
Senior Secured Note. Schedule 1, attached hereto, listing all investors who
purchase Senior Secured Notes shall be automatically revised to include all such
investors who execute a signature page in the form attached hereto as Schedule
2.
Counterparts. This Agreement may be executed by the parties hereto in
several counterparts and by different parties in separate counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same Agreement.
Cooperation. PlayNet agrees to use its best efforts to co-operate with
holders of the Senior Secured Notes to take such steps as are reasonably
necessary to give effect to the transactions contemplated hereby, including
without limitation, promptly duly executing
Bridge Financing Letter Agreement
December 30, 1996
Page 11
and delivering such financing statements as may be necessary to perfect the
security interests contemplated hereby.
Please confirm that the foregoing correctly sets forth our agreement by signing
where indicated.
Very truly yours,
PlayNet Technologies, Inc.
By: /s/ Xxxxxx Xxxxx
---------------------------
Xxxxxx Xxxxx
President and Chief Executive
Officer
Accepted and agreed to as of Accepted and agreed to as of
the date first written above. the date first written above by
Xxxxx & Company Incorporated Xxxxxx Xxxxx
as an individual with respect to
personal undertakings contained
By: /s/ Xxxxx X. Xxxxx herein.
----------------------------
Xxxxx X. Xxxxx
Chief Financial Officer
By: /s/ Xxxxxx Xxxxx
-------------------------
Xxxxxx Xxxxx
SCHEDULE 1
LIST OF INVESTORS
Xxxxx & Company Incorporated
Xxxxx, indirectly through Xxxxxx Eblagon Leasing Ltd.
Xxxxx, indirectly through K. F. Chemical Co. Ltd.
SCHEDULE 2
Senior Secured Note Purchaser Signature Page
--------------------------------------------
By its execution and delivery of this signature page, the undersigned Purchaser
hereby joins in and agrees to be bound by the terms and conditions, and is
entitled to all rights and privileges, of the Letter Agreement, dated December
30, 1996, between Xxxxx & Company Incorporated, PlayNet Technologies and the
investors who purchase Senior Secured Notes as provided therein, as to the
principal amount of [First Stage Notes] [Second Stage Notes] purchased by
Purchaser as set forth below.
Name of Purchaser
---------------------------------------
(herein "Purchaser")
By: ____________________________________
Name: _________________________________
Title: __________________________________
Record and Notice Address:
==================================
----------------------------------
Telephone: _________________________
Facsimile: __________________________
Principal Amount of Senior Secured Notes Purchased:
______________________________________
Agreed and Accepted this
____ day of ____________, 199__
PlayNet Technologies, Inc.
By: _______________________________
Name: ____________________________
Title: _____________________________
EXHIBIT 1
OPERATIONAL HURDLES
-------------------
1. Executed agreements with a minimum of two of the following major music
publishers: Sony, Warner Brothers, Polygram, BMG, EMI and MCA.
2. Demonstrate production capacity of a minimum of 25 PlayNet units per
day, quality control tested.
3. Written orders for 5,000 PlayNet units.
4. Remote music download capability demonstrated at commercially
acceptable speed rates and quality.
5. Executed agreement with primary ISP provider. It is PlayNet's objective
to have terms generally reflective of those presented in financial
projections to date or with adjustments to unit and services pricing
that enable the maintenance of substantially similar revenue financial
projections to date.
6. Accounting Server Functionality and the ability to account for and
settle accounts demonstrated.
7. Reasonably satisfactory coin drop data results from the forty (40)
PlayNet unit test.
8. Selection of two (2) outside independent directors.
9. PlayNet unit functionality reasonably stable with breadth of functions
and robustness sufficient for commercial rollout.
10. Estimated PlayNet unit Bill of Materials for first calendar quarter
1997 at an average of approximately $2,200 per unit.
11. Viable financing plan in place to allow commercial sales.
EXHIBIT 2
FORM OF SENIOR SECURED NOTE
SENIOR SECURED NOTE
$__________ New York, New York
December ____, 1996
FOR VALUE RECEIVED, PlayNet Technologies, Inc. (the "Maker") hereby
promises to pay to ___________________________ (the "Holder"), in lawful money
of the United States of America, the principal sum of _______________________
and 00/100 Dollars ($_______) (the "Principal Amount") plus accrued interest
thereon on the Maturity Date, as defined below, in accordance with the terms set
forth herein.
This Note shall bear interest payable on the Maturity Date (as defined
below) at a rate of twelve percent (12%) per annum; shall be senior to any and
all existing and future indebtedness of the Maker; and shall rank pari passu
with any and all other Senior Secured Notes which Maker enters into between
December 16, 1996 and January 31, 1997, each of which is issued as part of the
Initial Bridge Financing or Second Stage Bridge Financing conducted by the Maker
as described in that certain Letter Agreement dated December ___, 1996, by and
between the Maker and Xxxxx & Company Incorporated (the "Letter Agreement").
This Senior Secured Note shall mature on the earlier of (a) the closing
of any Qualified Public Offering or Qualified Private Placement, each as defined
below, or (b) one (1) year from the date hereof (the "Maturity Date"). As used
herein, (i) a "Qualified Public Offering" shall mean the closing of any public
offering of common stock of the Maker, having a par value of $.001 per share,
raising aggregate gross proceeds of at least $15 million to the Maker, and (ii)
a "Qualified Private Placement" shall mean the closing of any privately arranged
financing transaction or series of transactions raising aggregate proceeds of at
least $15 million to the Maker.
The Maker shall have the right to prepay, in whole or in part, the
Principal Amount together with interest accrued thereon through the date of
prepayment, at any time without penalty or premium.
Upon the occurrence of an Event of Default, the obligations of the
Maker to the Holder arising under this Senior Secured Note, direct and indirect,
absolute or contingent, shall immediately mature and become due and payable
without demand or notice. The following shall be deemed an "Event of Default"
under this Senior Secured Note: (a) a breach of the Maker of any promise, term,
covenant, obligation, representation or warranty arising under this Senior
Secured Note or the Letter Agreement, including the failure to make any payment
of the Principal Amount or accrued interest when due; (b) the filing of a
petition seeking relief, or the granting of relief, under the Bankruptcy Code or
any similar Federal or State statute by or against the Maker, the making of a
general assignment for the benefit of creditors by Maker, or any action by the
Maker for the purpose of effecting the foregoing; (c) the appointment, or the
filing of a petition seeking the appointment, of a custodian, receiver, trustee
or liquidator for the Maker or any of its properties or the taking of possession
of any part of the properties of the Maker at the instance of any governmental
authority; (d) when Maker becomes insolvent or
has suspended its transaction of its usual business; (e) the dissolution or
merger, consolidation or reorganization of Maker in violation of the terms of
the Letter Agreement; (f) the sale of substantially all of the common stock or
assets of the Maker or (g) any change in the identity, authority or
responsibilities of any person holding the management positions of President and
Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and
Senior Vice President of Sales as of the date of this Agreement.
The Maker agrees to pay all costs of collection, including, without
limitation, reasonable attorney's fees, in the event enforcement of this Senior
Secured Note or execution of any judgment upon this Senior Secured Note is
required. No amendment, modification or waiver of any provision of this Senior
Secured Note shall be effective unless the same shall be in writing and signed
by the Holder and Maker.
Presentment or other demand for payment, notice of dishonor and protest
are hereby waived by Maker
This Senior Secured Note is one of the Senior Secured Notes referred to
in the Letter Agreement and is secured by the collateral described therein and
is entitled to all the benefits of such Letter Agreement.
This Senior Secured Note shall be governed by and construed in
accordance with the laws of the State of New York and applicable Federal Law of
the United States without regard to the conflict of laws provisions thereof.
Holder and Maker hereby submit to the jurisdiction of the Courts of the State of
New York for all purposes with respect hereto.
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT BY THE HOLDER AGAINST THE
MAKER WITH RESPECT TO THIS SENIOR SECURED NOTE, OR VICE VERSA, THE MAKER AND
HOLDER WAIVE A TRIAL BY JURY.
IN WITNESS WHEREOF, the Maker has caused this Senior Secured Note to be
executed by its duly authorized officer as of the day and year first written
above.
WITNESS: PLAYNET TECHNOLOGIES, INC.
______________________________ By: ____________________________________
Name: Xxxxxx Xxxxx
President & Chief Executive Officer
Address for Notice to the Holder:
______________________________________
______________________________________
______________________________________
______________________________________
EXHIBITS 3 through 7
FORMS OF WARRANT
ATTACHED HERETO
EXHIBIT 3 - Form of Xxxxx and
Third Party Investors Warrants
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT.
PLAYNET TECHNOLOGIES, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received Xxxxx & Company Incorporated or registered assigns (the
"Holder") is the owner of this warrant ("Warrant") which entitles the Holder
hereof to purchase, at any time from the date which is either (i) one year from
the date of the closing on or prior to the Five Month Date of a Qualified Public
Offering or closing on or prior to the Five Month Date of a Qualified Private
Placement (all as defined below) or (ii) if no such Qualified Public Offering or
Qualified Private Placement closes on or prior to the Five Month Date, one year
from the date of issuance hereof ((i) and (ii) singularly and collectively,the
"Exercise Date") through and including the Expiration Date (hereinafter
defined), such number of fully paid and non-assessable shares of Common Stock,
$.01 par value ("Common Stock"), of PlayNet Technologies, Inc., a Delaware
corporation (the "Company") calculated as follows:
- in the event of the closing of a Qualified Public Offering on
or prior to the date which is five months from the issuance of
this Warrant (the "Five Month Date"):
100% X $750,000
-----------------------------------------------
the per share price of the
common stock offered in such
Qualified Public Offering
-- in the event that such Qualified Public Offering is not closed
on or prior to the Five Month Date but a Qualified Private
Placement is closed on or prior to the Five Month Date:
100% X $750,000
-----------------------------------------------
the lowest per share price of
the common stock offered in
such Qualified Private Placement
--- in the event that a Qualified Public Offering or Qualified
Private Placement is not closed prior to or on the Five Month
Date:
$750,000
$5.00
(each formula subject to adjustment as hereinafter provided).
For purposes of this Warrant, the term "Qualified Public
Offering" shall mean the closing of any public offering of Common Stock of the
Company raising gross proceeds of at least $15 million to the Company and the
term "Qualified Private Placement" shall mean the closing of any privately
arranged financing transaction or series of transactions raising in the
aggregate gross proceeds of at least $15 million to the Company.
1. Warrant; Purchase Price
This Warrant shall entitle the Holder initially to purchase
shares of Common Stock of the Company as calculated above and the purchase price
payable upon exercise of the Warrants shall be, (i) in the event of the closing
of a Qualified Public Offering prior to or on the Five Month Date, the per share
price of the Common Stock Offered in such Qualified Public Offering, (ii) in the
event that such a Qualified Public Offering is not closed on or prior to the
Five Month Date but a Qualified Private Placement is closed on or prior to the
Five Month Date, the lowest per share price of the Common Stock offered in such
Qualified Private Placement, or (iii) in the event that such Qualified Public
Offering or Qualified Private Placement is not closed on or prior to the Five
Month Date, $5.00 per share of Common Stock (each of (i), (ii) and (iii) the
"Relevant Purchase Price" and together the "Relevant Purchase Prices"). The
Relevant Purchase Price and number of shares of Common Stock issuable upon
exercise of this Warrant are subject to adjustment as provided in Article 6. The
shares of Common Stock issuable upon exercise of this Warrant (and/or other
shares of common stock so issuable by reason of any adjustments pursuant to
Article 6) are sometimes referred to herein as the "Warrant Shares." The
aggregate purchase price for the shares of Common Stock of the Company to be
received by the Holder hereof upon exercise of this Warrant shall be payable, at
the option of the Holder, either (i) in cash in lawful money of the United
States of America or by certified or cashier's check; or (ii) if such Holder is
Xxxxx & Company Incorporated, by cancellation, in whole or in part, of that
certain $750,000 Senior Secured Note issued to Xxxxx & Company Incorporated on
December 30, 1996; or (iii) as otherwise provided herein.
2. Exercise; Expiration Date
2.1 This Warrant is exercisable, at the option of the Holder,
in whole or in part at any time and from time to time from the Exercise Date
through and including the Expiration Date (the "Exercise Period"), upon
surrender of this Warrant Certificate to the Company together with a duly
completed Notice of Exercise, in the form attached hereto as Exhibit A, and
payment of an amount equal to the Relevant Purchase Price times
2
the number of shares of Common Stock to be received upon exercise of this
Warrant. In the case the Holder hereof elects to exercise this Warrant for less
than all the shares of Common Stock of the Company represented by this Warrant
Certificate, the Company shall cancel this Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate
providing for the exercise of the balance of such shares of Common Stock.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on the date which is five years from the date of the issuance of this
Warrant, or if such day shall in the State of New York be a holiday or a day on
which banks are authorized to close, then 5:00 p.m. local time in the State of
New York the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of this Warrant and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 The Company shall register upon its books any transfer of
this Warrant Certificate, upon surrender of same to the Company with a written
instrument of transfer duly executed by the registered Holder or by a duly
authorized attorney. Upon any such registration of transfer, new Warrant
Certificate(s) shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled by the Company. A Warrant Certificate may also be
exchanged, at the option of the Holder, for new Warrant Certificates of
different denominations representing an aggregate purchase price of $750,000.
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of this Warrant, such number of shares as shall then be
issuable upon the exercise of this Warrant. The Company covenants that all
shares of capital stock which shall be issuable upon exercise of this Warrant
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof, and that upon
issuance such shares shall be listed on each national securities exchange, if
any, on which the other shares of such outstanding series of capital stock of
the Company are then listed.
3
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate replacing
such Warrant Certificate.
6. Adjustment of Relevant Purchase Price and
Number of Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Relevant Purchase Price with respect to the Warrant
Shares shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock through
stock split or otherwise, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv)
issue by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation) other securities of the
Company, or (v) in case of a consolidation or merger of the Company
with or into another corporation or in case of the sale or transfer of
all or substantially all of the assets of the Company (hereinafter, a
"Reorganization Transaction"), the number and/or nature of Warrant
Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to
receive the kind and number of Warrant Shares or other securities of
the Company (or of any successor company) which he would have owned or
have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
retroactively as of the record date of such event.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock, or all holders of Common Stock shall otherwise
become entitled to receive, shares of capital stock of the Company
(other than dividends or distributions on its Common Stock referred to
in paragraph (a) above), evidences of its indebtedness or rights,
4
options, warrants or convertible securities providing the right to
subscribe for or purchase any shares of the Company's capital stock or
evidences of its indebtedness, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of Warrant Shares theretofore
purchasable upon the exercise of this Warrant, by a fraction, of which
the numerator shall be the then Market Price Per Share of the Warrant
Shares (as determined pursuant to Section 9.2) on the record date
mentioned below in this paragraph (b), and of which the denominator
shall be the then Market Price Per Share of the Warrant Shares on such
record date less the then fair value (as determined by the Board of
Directors of the Company, in good faith) of the portion of the shares
of the Company's capital stock other than Common Stock, evidences of
indebtedness, or of such rights, options, warrants or convertible
securities, distributable with respect to each Warrant Share. Such
adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the
determination of shareholders entitled to receive such distribution.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as provided in this Section 6.1,
the Relevant Purchase Prices with respect to the Warrant Shares shall
be adjusted by multiplying such Relevant Purchase Prices immediately
prior to such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares so purchasable
immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under this Warrant, or in the Relevant Purchase Prices with respect to the
Warrant Shares, shall be required unless such adjustment would require an
increase or decrease of at least 1% in the number of Warrant Shares issuable
upon the exercise of such Warrant, or in the Relevant Purchase Prices thereof;
provided, however, that any adjustments which by reason of this Section 6.3 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All final results of adjustments to the number of Warrant
Shares and the Relevant Purchase Prices thereof shall be rounded to the nearest
one thousandth of a share or the nearest cent, as the case may be. Anything in
this Section 6 to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the number of Warrant Shares
purchasable upon the exercise of each Warrant, or in the Relevant Purchase
Prices thereof, in addition to those required by such Section, as it in its
5
discretion shall determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights, warrants or options
to purchase Common Stock, or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions of cash out
of retained earnings) or convertible or exchangeable securities hereafter made
by the Company to the holders of its Common Stock shall not result in any tax to
the holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Relevant Purchase Price of such Warrant Shares
is adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chief Financial Officer or
Secretary of the Company, which sets forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and each of the then Relevant
Purchase Prices of such Warrant Shares after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
6.4 In the event that at any time prior to the expiration
of this Warrant and prior to their exercise:
(a) the Company shall declare any distribution (other than a
cash dividend or a dividend payable in securities of the Company with
respect to the Common Stock); or
(b) the Company shall offer for subscription to all the
holders of the Common Stock any additional shares of stock of any class
or any other securities convertible into Common Stock or any rights to
subscribe thereto; or
(c) the Company shall declare any stock split, stock dividend,
subdivision, combination, or similar distribution with respect to the
Common Stock that shall affect the outstanding number of shares of
Common Stock; or
(d) the Company shall declare a dividend, other than a
dividend payable in shares of the Company's own Common Stock; or
(e) there shall be any capital change in the Company as set
forth in Section 6.1(a)(v); or
6
(f) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company (other than in connection
with a consolidation, merger, or sale of all or substantially all of
its property, assets and business as an entity);
(each such event hereinafter being referred to as a "Notification Event"), the
Company shall cause to be mailed to the Holder, not less than 20 days prior to
the record date, if any, in connection with such Notification Event (provided,
however, that if there is no record date, 20 days prior to the effective date,
or in either case if 20 days prior notice is impracticable, as soon as
practicable) written notice specifying the nature of such event and the
effective date of, or the date on which the books of the Company shall close or
a record shall be taken with respect to, such event. Such notice shall also set
forth facts indicating the effect of such action (to the extent such effect may
be known at the date of such notice) on each of the Relevant Purchase Prices and
the kind and amount of the shares of stock or other securities or property
deliverable upon exercise of this Warrant.
6.5 The form of Warrant Certificate need not be changed
because of any change in the Relevant Purchase Prices, the number of Warrant
Shares issuable upon the exercise of a Warrant or the number of Warrants
outstanding pursuant to this Section 6, and Warrant Certificates issued before
or after such change may state the same Relevant Purchase Prices, the same
number of Warrants, and the same number of Warrant Shares issuable upon exercise
of Warrants as are stated in the Warrant Certificates theretofore issued
pursuant to this Agreement. The Company may, however, at any time, in its sole
discretion, make any change in the form of Warrant Certificate that it may deem
appropriate and that does not affect the substance thereof, and any Warrant
Certificates thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
7. Conversion Rights
7.1 After the occurrence of any Reorganization Transaction (as
such term is defined in Section 6.1(a)(v)), in lieu of exercise of any portion
of this Warrant as provided in Section 2.1 hereof, the Warrant Shares
represented by this Warrant Certificate (or any portion thereof) may, at the
election of the Holder, be converted into the nearest whole number of shares of
Common Stock of the Company (or other securities of the Company or any successor
Company underlying the Warrant) equal to: (1) the product of (a) the number of
shares of Common Stock (or such other securities) then issuable upon the
exercise of this Warrant to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
7
to the date of conversion over (ii) the Relevant Purchase Prices in effect on
the business day next preceding the date of conversion, divided by (2) the
Market Price Per Share with respect to the date of conversion.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while this
Warrant remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company (or any successor company), at its
offices, this Warrant Certificate accompanied by a duly completed Notice of
Conversion in the form attached hereto as Exhibit B. The Warrants (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant Certificate for conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the conversion
date, the Company (or the successor company) shall issue and shall deliver to
the Holder (i) a certificate or certificates representing the number of shares
of Common Stock (or such other securities) to which the Holder shall be entitled
as a result of the conversion, and (ii) if the Warrant Certificate is being
converted in part only, a new certificate of like tenor and date for the balance
of the unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
this Warrant, reduce the then current Relevant Purchase Prices to any amount
deemed appropriate by the Board of Directors of the Company and/or extend the
date of the expiration of the Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of this Warrant. This Warrant may not be
exercised in such number as would result (except for the provisions of this
paragraph) in the issuance of a fraction of a share of Common Stock unless the
Holder is exercising this Warrant for all shares of Common Stock to be received
by the Holder hereunder. In such event, the Company shall, upon the exercise of
the entirety of this Warrant, issue to the Holder the largest aggregate whole
number of shares of Common Stock called for thereby upon receipt of the Relevant
Purchase Price for all shares of Common Stock to be issued upon exercise hereof
and pay a sum in cash equal to the remaining fraction of a share of Common
Stock, multiplied by its Market Price Per Share (as determined pursuant to
8
Section 9.2 below) as of the last business day preceding the date on which this
Warrant are presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock of the Company (or any other securities
of the Company or of any successor company) on any date shall mean the closing
price per share of such class or series of securities for the trading day
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company (or other securities of the Company or of such successor company)
are listed or admitted to trading or, if applicable, the last sale price, or in
case no sale takes place on such day, the average of the closing bid and asked
prices of such securities on NASDAQ or any comparable system, or if such
securities are not reported on NASDAQ, or a comparable system, the average of
the closing bid and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If such bid and asked prices are not available, then
"Market Price Per Share" shall be equal to the fair market value of the such
securities as determined in good faith by the Board of Directors of the Company
(or of such successor company).
10. Restrictions on Transfer; Registration Rights
10.1 No sale, transfer, assignment, hypothecation or other
disposition of this Warrant or Warrant Shares shall be made unless any such
transfer, assignment or other disposition will comply with the rules and
statutes administered by the Securities and Exchange Commission and (i) a
Registration Statement under the Securities Act of 1933, as amended (the "Act"),
including such shares is currently in effect, or (ii) in the opinion of counsel
a current Registration Statement is not required for such disposition of the
shares.
10.2 In the event of a proposed sale or transfer of this
Warrant or Warrant Shares in a transaction other than a sale pursuant to a
public offering registered under the Act, a Holder shall deliver to the Company
an opinion of counsel addressed to the Company (which shall be rendered by
counsel reasonably acceptable to the Company) to the effect that the proposed
transfer may be effected without registration or qualification under any Federal
or state securities or blue sky law. Such counsel rendering the opinion shall,
as promptly as practicable, notify the Company and the Holder of such opinion
and of the terms and conditions, if any, to be observed in such transfer,
whereupon the Holder shall be entitled to transfer this Warrant or the Warrant
Shares (or a portion thereof).
9
10.3 The Company agrees that, at any time or times hereafter,
until the second anniversary of the Expiration Date of this Warrant, as and when
it intends to register any of its securities under the Act, whether for its own
account and/or on behalf of selling stockholders (except in connection with an
offering solely to its employees, an offering pursuant to an employee benefit
plan, a dividend or interest reinvestment plan, or an offering solely related to
an acquisition on a Form S-4 or any subsequent similar form) permitting a
secondary offering or distribution the Company will notify the Holder of such
intention and, upon request from the Holder, will use its best efforts to cause
the Warrant Shares designated by the Holder to be registered under the
Securities Act. The number of Warrant Shares to be included in such offering may
be reduced if and to the extent that the underwriter of securities included in
the registration statement and offered by the Company shall be of the opinion
that such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that the percentage of the
reduction of such Warrant Shares shall be no greater than the percentage
reduction of securities of other selling stockholders, as such percentage
reductions are determined in the good faith judgment of the Company. The Company
will use its best efforts to keep each such Registration Statement current for
such period of time as is not otherwise burdensome to the Company.
10.4 Any registration statement referred to in subsection 10.3
hereof shall be prepared and processed in accordance with the following terms
and conditions:
(i) the Holder will cooperate in furnishing promptly to the
Company in writing any information requested by the Company in
connection with the preparation, filing and processing of such
registration statement.
(ii) to the extent requested by an underwriter of securities
included in the registration statement and offered by the Company, the
Holder will defer the sale of Warrant Shares for a period commencing
twenty (20) days prior and terminating sixty (60) days after the
effective date of the registration statement, provided that any
principal shareholders of the Company who also have shares included in
the registration statement will also defer their sales for a similar
period, except for sales pursuant to registrations on Form S-8 or S-4
or any similar or successor forms thereto.
(iii) The Company will furnish to the Holder such number of
prospectuses or other documents incident to such registration as may
from time to time be reasonably requested, and cause its shares to be
qualified under the blue-sky laws of those states reasonably requested
by the Holder.
10
(iv) The Company will indemnify the Holder (and any officer,
director or controlling person of the Holder) and any underwriters
acting on behalf of the Holder against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement of any material
facts contained in any registration statement filed pursuant hereto, or
any document relating thereto, including all amendments and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and will reimburse the Holder (or such other aforementioned parties) or
such underwriters for any legal and all other expenses reasonably
incurred in accordance with investigating or defending any such claim,
loss, damage, liability or action; provided, however, that the Company
will not be liable where the untrue or alleged untrue statement or
omission or alleged omission is based upon information furnished in
writing to the Company by the Holder or any underwriter obtained by the
Holder expressly for use therein, or as a result of the Holder's or any
such underwriter's failure to furnish to the Company information duly
requested in writing by counsel for the Company specifically for use
therein; provided that with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this paragraph shall
not inure to the benefit of any underwriter from whom the person
asserting such losses, claims, damages or liability purchased the
securities concerned, to the extent that any such loss, claim, damage
or liability of such underwriter results from the fact that a copy of
the prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such securities to such person.
This indemnity agreement shall be in addition to any other liability
the Company may have. The indemnity agreement of the Company contained
in this paragraph (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the
Warrant Shares.
(v) The Holder will indemnify the Company (and any officer,
director or controlling person of the Company) and any underwriters
acting on behalf of the Company against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
11
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement filed pursuant
hereto, or any document relating thereto, including all amendments, and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and, will reimburse the Company (or such other aforementioned parties)
or such underwriters for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability, or action; provided, however, that the Holder
will be liable as aforesaid only to the extent that such untrue or
alleged untrue statement or omission or alleged omission is based upon
information furnished in writing to the Company by the Holder or any
underwriter obtained by the Holder expressly for use therein, or as a
result of its or such underwriter's failure to furnish the Company with
information duly requested in writing by counsel for the Company
specifically for use therein. This indemnity agreement contained in
this paragraph (v) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Warrant
Shares.
(vi) Promptly after receipt by an indemnified party under this
subsection 10.4 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party, promptly notify the indemnifying party
of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this subsection
10.4. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this subsection 10.4 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation or
out-of-pocket expenses or losses or cost incurred in collaborating in
the defense.
12
(vii) Except as set forth in subsection 10.4(viii), the Company
shall bear all costs and expenses incident to any registration pursuant
to this Section 10.
(viii) The Holder shall pay any and all underwriters' discounts,
brokerage fees and transfer taxes incident to the sale of any
securities sold by such Holder pursuant to this Section 10, and shall
pay the fees and expenses of any special attorneys or accountants
retained by it.
(ix) If the filing of any registration statement pursuant to
subsection 10.4 would require the Company to obtain audited financial
statements other than its normal year end audit required for the filing
of its reports required under the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company may defer the filing of such registration
statement until the necessary audited financial statements are
available, unless the Holder arranges for the payment of the expense of
such audit to the extent that such expense would exceed the amount
which the Company would otherwise be required to bear in connection
with its normal audit schedule for reporting under the Exchange Act.
10.5 If the indemnification provided for in this Section 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 each indemnifying party shall in lieu of indemnifying
such indemnified party 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 Company, on the one hand, and the seller of such Warrant Shares, 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 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 Company, on the one hand, or the
sellers of such Warrant Shares, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the holder hereof agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if all of the sellers of such Warrant
Shares were treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations referred
to above. The amount paid or payable by 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 which reasonably
13
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions of this
Section, in no event shall the amount contributed by any seller from the sale of
Warrant Shares to which such contribution claim relates. No person guilty of
fraudulent misrepresentations (within the meaning of section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. Each Holder of this Warrant and each Holder of
Warrant Shares bearing the legend required by Section 10.6, by acceptance hereof
or thereof, as the case may be, agrees to the indemnification and contribution
provisions of this Section 10.5.
10.6 Legend. In case any shares are issued upon the exercise
in whole or in part of this Warrant or are thereafter transferred, in either
case under such circumstances that no registration under the Act is required or
effective, each certificate representing such shares shall bear on the face
thereof the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and any
transfer thereof is subject to the conditions specified in the Warrant
dated as of [Include Date] originally issued by PlayNet Technologies,
Inc. (the "Company") to [Include Name of Holder] to purchase shares of
Common Stock, $.001 par value, of the Company. A copy of the form of
such Warrant is on file with the Secretary of the Company in New York,
New York, and will be furnished without charge by the Company to the
holder of this certificate upon written request to the Secretary of the
Company at such address."
11. Miscellaneous
11.1 Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of New York.
11.2 Holder Not a Stockholder. Prior to the exercise of this
Warrant, the holder hereof shall not be entitled to any of the rights of a
stockholder of the Company including, without limitation, the right as a
stockholder to (a) vote on or consent to any proposed action of the Company or
(b) receive (i) dividends or any distributions made to stockholders, (ii) notice
of or attend any meetings of stockholders of the Company or (iii) notice of any
other proceedings of the Company.
11.3 Notices. Any notice, demand or delivery to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if sent by first class mail, postage
14
prepaid, addressed to (a) the holder of this Warrant or issued Warrant Shares at
its last known address appearing on the books at the Company maintained for such
purposes or (b) the Company at its principal offices at 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: General Counsel. The Holder of this Warrant
and the Company may each designate a different address by notice to the other
pursuant to this Section 11.3.
11.4 Investment Representation. The Holder represents that it
is purchasing the Warrant and all shares issuable upon exercise of this Warrant
for its own account and not as nominee or agent for any other person and not
with a view to, or for offer or sale in connection with any distribution thereof
(within the meaning of the Act) that would be in violation of the applicable
securities laws; provided, however, that subject to the restrictions contained
in Section 10, that the disposition of all or any part of such shares shall at
all times be within the Holder's exclusive control.
11.5 Confidentiality of Information. The Holder of this
Warrant (and any affiliates of the Holder) and any permitted transferee of this
Warrant will treat all documents, financial statements, reports and other
information delivered pursuant to this Warrant on a confidential basis with the
same degree of care it treats similar information of other companies of which it
holds securities and has investment banking relationships.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this 30th day of December, 1996.
PLAYNET TECHNOLOGIES, INC.
By: ___________________________
Name:
Title:
15
EXHIBIT A
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of PlayNet Technologies, Inc. (the "Company") and herewith makes payment
therefor in the amount of $_________, all on the terms and conditions specified
in the within Warrant, and requests that a certificate (or ______ certificates
in denominations of ______ shares) for the shares of Common Stock of the Company
hereby purchased be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) ________, whose address is _______________ and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for that
portion of the Warrant not exercised hereby be issued in the name of and
delivered to (choose one) (a) the undersigned or (b) ______________, whose
address is _______________________.
The undersigned represents that it is purchasing the
securities described above for its own account and not as a nominee or agent for
any other person and not with a view to, or for offer of sale in connection
with, any distribution thereof (within the meaning of the Securities Act of
1933) that would be in violation of the applicable securities laws; provided,
however, that subject to the restrictions contained in Section 10 of the Warrant
that the disposition of all or any part of such shares shall at all times be
within the undersigned's exclusive control.
Dated: __________________
By:________________________________
(signature of Registered Holder)
Signature Guaranteed:
___________________________
By:_____________________
Title:
NOTICE: The signature to this Notice must correspond with the name as
written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Notice must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
16
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant
to Section 7 of the Warrant Certificate accompanying this Notice of Conversion,
that number of shares of Common Stock issuable upon exercise of the Warrant for
an aggregate purchase price of $_______ into that number of shares of Common
Stock of the Company to be received by the undersigned pursuant to the
provisions of Section 7.1 of the accompanying Warrant Certificate.
Dated: _______________ ___________________________
Name of Holder
___________________________
Signature
Address:
___________________________
___________________________
___________________________
Signature Guaranteed:
___________________________
By:_____________________
Title:
17
ASSIGNMENT FORM
(To be executed only upon the
assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the
within Warrant hereby sells, assigns and transfers unto _____________________,
whose address is ________________________, all of the rights of the undersigned
under the within Warrant, with respect to the receipt of shares of Common Stock
of PlayNet Technologies, Inc. and, if such sale, assignment or transfer is for
less than the right to the receipt of all shares of Common Stock to which the
Holder is entitled upon exercise of such Warrant, that a new Warrant of like
tenor for that portion of the Warrant not being transferred hereunder be issued
in the name of and delivered to the undersigned, and does hereby irrevocably
constitute and appoint ______________ Attorney to register such transfer on the
books of the Company maintained for the purpose, with full power of substitution
in the premises.
Dated: _____________, 19__.
By:________________________________
(Signature of Registered Holder)
Signature Guaranteed:
__________________________
By:_______________________
Title:
NOTICE: The signature to this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Assignment must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
EXHIBIT 4 - Form of
"Xxxxx Investor" Warrants
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT.
PLAYNET TECHNOLOGIES, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received Xxxxxx Eblagon Financial Services Ltd. or registered
assigns (the "Holder") is the owner of this warrant ("Warrant") which entitles
the Holder hereof to purchase, at any time from the date which is either (i) one
year from the date of the closing on or prior to the Five Month Date of a
Qualified Public Offering or closing on or prior to the Five Month Date of a
Qualified Private Placement (all as defined below) or (ii) if no such Qualified
Public Offering or Qualified Private Placement closes on or prior to the Five
Month Date, one year from the date of issuance hereof ((i) and (ii) singularly
and collectively, the "Exercise Date") through and including the Expiration Date
(hereinafter defined), such number of fully paid and non-assessable shares of
Common Stock, $.01 par value ("Common Stock"), of PlayNet Technologies, Inc., a
Delaware corporation (the "Company") calculated as follows:
- in the event of the closing of a Qualified Public Offering on
or prior to the date which is five months from the issuance of
this Warrant (the "Five Month Date"):
50% X $500,000
------------------------------------
the per share price of the
common stock offered in such
Qualified Public Offering
-- in the event that such Qualified Public Offering is not closed
on or prior to the Five Month Date but a Qualified Private
Placement is closed on or prior to the Five Month Date:
50% X $500,000
------------------------------------
the lowest per share price of
the common stock offered in
such Qualified Private Placement
--- in the event that a Qualified Public Offering or Qualified
Private Placement is not completed on or prior to the Five
Month Date:
50% X $500,000
------------------------------------
$5.00
(each formula subject to adjustment as hereinafter provided).
For purposes of this Warrant, the term "Qualified Public
Offering" shall mean the closing of any public offering of Common Stock of the
Company raising gross proceeds of at least $15 million to the Company and the
term "Qualified Private Placement" shall mean the closing of any privately
arranged financing transaction or series of transactions raising in the
aggregate gross proceeds of at least $15 million to the Company.
1. Warrant; Purchase Price
This Warrant shall entitle the Holder initially to purchase
shares of Common Stock of the Company as calculated above and the purchase price
payable upon exercise of the Warrants shall be, (i) in the event of the closing
of a Qualified Public Offering on or prior to the Five Month Date, the per share
price of the Common Stock Offered in such Qualified Public Offering, (ii) in the
event that such a Qualified Public Offering is not closed on or prior to the
Five Month Date but a Qualified Private Placement is closed on or prior to the
Five Month Date, the lowest per share price of the Common Stock offered in such
Qualified Private Placement, or (iii) in the event that such Qualified Public
Offering or Qualified Private Placement is not closed on or prior to the Five
Month Date, $5.00 per share of Common Stock (each of (i), (ii) and (iii) the
"Relevant Purchase Price" and together the "Relevant Purchase Prices"). The
Relevant Purchase Price and number of shares of Common Stock issuable upon
exercise of this Warrant are subject to adjustment as provided in Article 6. The
shares of Common Stock issuable upon exercise of this Warrant (and/or other
shares of common stock so issuable by reason of any adjustments pursuant to
Article 6) are sometimes referred to herein as the "Warrant Shares." The
aggregate purchase price for the shares of Common Stock of the Company to be
received by the Holder hereof upon exercise of this Warrant shall be payable, at
the option of the Holder, either (i) in cash in lawful money of the United
States of America or by certified or cashier's check; or (ii) if such Holder is
Xxxxxx Eblagon Leasing Ltd., by cancellation, in whole or in part, of that
certain $500,000 Senior Secured Note issued to Xxxxxx Eblagon Leasing Ltd. on ,
1996; or (iii) as otherwise provided herein.
2
2. Exercise; Expiration Date
2.1 This Warrant is exercisable, at the option of the Holder,
in whole or in part at any time and from time to time from the Exercise Date
through and including the Expiration Date (the "Exercise Period"), upon
surrender of this Warrant Certificate to the Company together with a duly
completed Notice of Exercise, in the form attached hereto as Exhibit A, and
payment of an amount equal to the Relevant Purchase Price times the number of
shares of Common Stock to be received upon exercise of this Warrant. In the case
the Holder hereof elects to exercise this Warrant for less than all the shares
of Common Stock of the Company represented by this Warrant Certificate, the
Company shall cancel this Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate providing for the exercise
of the balance of such shares of Common Stock.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on the date which is five years from the date of the issuance of this
Warrant, or if such day shall in the State of New York be a holiday or a day on
which banks are authorized to close, then 5:00 p.m. local time in the State of
New York the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of this Warrant and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 The Company shall register upon its books any transfer of
this Warrant Certificate, upon surrender of same to the Company with a written
instrument of transfer duly executed by the registered Holder or by a duly
authorized attorney. Upon any such registration of transfer, new Warrant
Certificate(s) shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled by the Company. A Warrant Certificate may also be
exchanged, at the option of the Holder, for new Warrant Certificates of
different denominations representing an aggregate purchase price of $500,000.
3
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of this Warrant, such number of shares as shall then be
issuable upon the exercise of this Warrant. The Company covenants that all
shares of capital stock which shall be issuable upon exercise of this Warrant
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof, and that upon
issuance such shares shall be listed on each national securities exchange, if
any, on which the other shares of such outstanding series of capital stock of
the Company are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate replacing
such Warrant Certificate.
6. Adjustment of Relevant Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Relevant Purchase Price with respect to the Warrant
Shares shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock through
stock split or otherwise, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv)
issue by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation) other securities of the
Company, or (v) in case of a consolidation or merger of the Company
with or into another corporation or in case of the sale or transfer of
all or substantially all of the assets of the Company (hereinafter, a
"Reorganization Transaction"), the number and/or nature of Warrant
Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to
receive the kind and number of Warrant Shares or other securities of
4
the Company (or of any successor company) which he would have owned or
have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
retroactively as of the record date of such event.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock, or all holders of Common Stock shall otherwise
become entitled to receive, shares of capital stock of the Company
(other than dividends or distributions on its Common Stock referred to
in paragraph (a) above), evidences of its indebtedness or rights,
options, warrants or convertible securities providing the right to
subscribe for or purchase any shares of the Company's capital stock or
evidences of its indebtedness, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of Warrant Shares theretofore
purchasable upon the exercise of this Warrant, by a fraction, of which
the numerator shall be the then Market Price Per Share of the Warrant
Shares (as determined pursuant to Section 9.2) on the record date
mentioned below in this paragraph (b), and of which the denominator
shall be the then Market Price Per Share of the Warrant Shares on such
record date less the then fair value (as determined by the Board of
Directors of the Company, in good faith) of the portion of the shares
of the Company's capital stock other than Common Stock, evidences of
indebtedness, or of such rights, options, warrants or convertible
securities, distributable with respect to each Warrant Share. Such
adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the
determination of shareholders entitled to receive such distribution.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as provided in this Section 6.1,
the Relevant Purchase Prices with respect to the Warrant Shares shall
be adjusted by multiplying such Relevant Purchase Prices immediately
prior to such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares so purchasable
immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under this Warrant, or in the Relevant Purchase Prices with respect to the
Warrant Shares, shall be required unless such adjustment would require an
5
increase or decrease of at least 1% in the number of Warrant Shares issuable
upon the exercise of such Warrant, or in the Relevant Purchase Prices thereof;
provided, however, that any adjustments which by reason of this Section 6.3 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All final results of adjustments to the number of Warrant
Shares and the Relevant Purchase Prices thereof shall be rounded to the nearest
one thousandth of a share or the nearest cent, as the case may be. Anything in
this Section 6 to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the number of Warrant Shares
purchasable upon the exercise of each Warrant, or in the Relevant Purchase
Prices thereof, in addition to those required by such Section, as it in its
discretion shall determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights, warrants or options
to purchase Common Stock, or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions of cash out
of retained earnings) or convertible or exchangeable securities hereafter made
by the Company to the holders of its Common Stock shall not result in any tax to
the holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Relevant Purchase Price of such Warrant Shares
is adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chief Financial Officer or
Secretary of the Company, which sets forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and each of the then Relevant
Purchase Prices of such Warrant Shares after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
6.4 In the event that at any time prior to the expiration of
this Warrant and prior to their exercise:
(a) the Company shall declare any distribution (other than a
cash dividend or a dividend payable in securities of the Company with
respect to the Common Stock); or
(b) the Company shall offer for subscription to all the
holders of the Common Stock any additional shares of stock of any class
or any other securities convertible into Common Stock or any rights to
subscribe thereto; or
6
(c) the Company shall declare any stock split, stock dividend,
subdivision, combination, or similar distribution with respect to the
Common Stock that shall affect the outstanding number of shares of
Common Stock; or
(d) the Company shall declare a dividend, other than a
dividend payable in shares of the Company's own Common Stock; or
(e) there shall be any capital change in the Company as set
forth in Section 6.1(a)(v); or
(f) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company (other than in connection
with a consolidation, merger, or sale of all or substantially all of
its property, assets and business as an entity);
(each such event hereinafter being referred to as a "Notification Event"), the
Company shall cause to be mailed to the Holder, not less than 20 days prior to
the record date, if any, in connection with such Notification Event (provided,
however, that if there is no record date, 20 days prior to the effective date,
or in either case if 20 days prior notice is impracticable, as soon as
practicable) written notice specifying the nature of such event and the
effective date of, or the date on which the books of the Company shall close or
a record shall be taken with respect to, such event. Such notice shall also set
forth facts indicating the effect of such action (to the extent such effect may
be known at the date of such notice) on each of the Relevant Purchase Prices and
the kind and amount of the shares of stock or other securities or property
deliverable upon exercise of this Warrant.
6.5 The form of Warrant Certificate need not be changed
because of any change in the Relevant Purchase Prices, the number of Warrant
Shares issuable upon the exercise of a Warrant or the number of Warrants
outstanding pursuant to this Section 6, and Warrant Certificates issued before
or after such change may state the same Relevant Purchase Prices, the same
number of Warrants, and the same number of Warrant Shares issuable upon exercise
of Warrants as are stated in the Warrant Certificates theretofore issued
pursuant to this Agreement. The Company may, however, at any time, in its sole
discretion, make any change in the form of Warrant Certificate that it may deem
appropriate and that does not affect the substance thereof, and any Warrant
Certificates thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
7
7. Conversion Rights
7.1 After the occurrence of any Reorganization Transaction (as
such term is defined in Section 6.1(a)(v)), in lieu of exercise of any portion
of this Warrant as provided in Section 2.1 hereof, the Warrant Shares
represented by this Warrant Certificate (or any portion thereof) may, at the
election of the Holder, be converted into the nearest whole number of shares of
Common Stock of the Company (or other securities of the Company or any successor
Company underlying the Warrant) equal to: (1) the product of (a) the number of
shares of Common Stock (or such other securities) then issuable upon the
exercise of this Warrant to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Relevant Purchase Prices in effect on
the business day next preceding the date of conversion, divided by (2) the
Market Price Per Share with respect to the date of conversion.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while this
Warrant remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company (or any successor company), at its
offices, this Warrant Certificate accompanied by a duly completed Notice of
Conversion in the form attached hereto as Exhibit B. The Warrants (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant Certificate for conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the conversion
date, the Company (or the successor company) shall issue and shall deliver to
the Holder (i) a certificate or certificates representing the number of shares
of Common Stock (or such other securities) to which the Holder shall be entitled
as a result of the conversion, and (ii) if the Warrant Certificate is being
converted in part only, a new certificate of like tenor and date for the balance
of the unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
this Warrant, reduce the then current Relevant Purchase Prices to any amount
deemed appropriate by the Board of Directors of the Company and/or extend the
date of the expiration of the Warrants.
8
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of this Warrant. This Warrant may not be
exercised in such number as would result (except for the provisions of this
paragraph) in the issuance of a fraction of a share of Common Stock unless the
Holder is exercising this Warrant for all shares of Common Stock to be received
by the Holder hereunder. In such event, the Company shall, upon the exercise of
the entirety of this Warrant, issue to the Holder the largest aggregate whole
number of shares of Common Stock called for thereby upon receipt of the Relevant
Purchase Price for all shares of Common Stock to be issued upon exercise hereof
and pay a sum in cash equal to the remaining fraction of a share of Common
Stock, multiplied by its Market Price Per Share (as determined pursuant to
Section 9.2 below) as of the last business day preceding the date on which this
Warrant are presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock of the Company (or any other securities
of the Company or of any successor company) on any date shall mean the closing
price per share of such class or series of securities for the trading day
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company (or other securities of the Company or of such successor company)
are listed or admitted to trading or, if applicable, the last sale price, or in
case no sale takes place on such day, the average of the closing bid and asked
prices of such securities on NASDAQ or any comparable system, or if such
securities are not reported on NASDAQ, or a comparable system, the average of
the closing bid and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If such bid and asked prices are not available, then
"Market Price Per Share" shall be equal to the fair market value of the such
securities as determined in good faith by the Board of Directors of the Company
(or of such successor company).
10. Restrictions on Transfer; Registration Rights
10.1 No sale, transfer, assignment, hypothecation or other
disposition of this Warrant or Warrant Shares shall be made unless any such
transfer, assignment or other disposition will comply with the rules and
statutes administered by the Securities and Exchange Commission and (i) a
9
Registration Statement under the Securities Act of 1933, as amended (the "Act"),
including such shares is currently in effect, or (ii) in the opinion of counsel
a current Registration Statement is not required for such disposition of the
shares.
10.2 In the event of a proposed sale or transfer of this
Warrant or Warrant Shares in a transaction other than a sale pursuant to a
public offering registered under the Act, a Holder shall deliver to the Company
an opinion of counsel addressed to the Company (which shall be rendered by
counsel reasonably acceptable to the Company) to the effect that the proposed
transfer may be effected without registration or qualification under any Federal
or state securities or blue sky law. Such counsel rendering the opinion shall,
as promptly as practicable, notify the Company and the Holder of such opinion
and of the terms and conditions, if any, to be observed in such transfer,
whereupon the Holder shall be entitled to transfer this Warrant or the Warrant
Shares (or a portion thereof).
10.3 The Company agrees that, at any time or times hereafter,
until the second anniversary of the Expiration Date of this Warrant, as and when
it intends to register any of its securities under the Act, whether for its own
account and/or on behalf of selling stockholders (except in connection with an
offering solely to its employees, an offering pursuant to an employee benefit
plan, a dividend or interest reinvestment plan, or an offering solely related to
an acquisition on a Form S-4 or any subsequent similar form) permitting a
secondary offering or distribution the Company will notify the Holder of such
intention and, upon request from the Holder, will use its best efforts to cause
the Warrant Shares designated by the Holder to be registered under the
Securities Act. The number of Warrant Shares to be included in such offering may
be reduced if and to the extent that the underwriter of securities included in
the registration statement and offered by the Company shall be of the opinion
that such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that the percentage of the
reduction of such Warrant Shares shall be no greater than the percentage
reduction of securities of other selling stockholders, as such percentage
reductions are determined in the good faith judgment of the Company. The Company
will use its best efforts to keep each such Registration Statement current for
such period of time as is not otherwise burdensome to the Company.
10.4 Any registration statement referred to in subsection 10.3
hereof shall be prepared and processed in accordance with the following terms
and conditions:
(i) the Holder will cooperate in furnishing promptly to the
Company in writing any information requested by the Company in
10
connection with the preparation, filing and processing of such
registration statement.
(ii) to the extent requested by an underwriter of securities
included in the registration statement and offered by the Company, the
Holder will defer the sale of Warrant Shares for a period commencing
twenty (20) days prior and terminating sixty (60) days after the
effective date of the registration statement, provided that any
principal shareholders of the Company who also have shares included in
the registration statement will also defer their sales for a similar
period, except for sales pursuant to registrations on Form S-8 or S-4
or any similar or successor forms thereto.
(iii) The Company will furnish to the Holder such number of
prospectuses or other documents incident to such registration as may
from time to time be reasonably requested, and cause its shares to be
qualified under the blue-sky laws of those states reasonably requested
by the Holder.
(iv) The Company will indemnify the Holder (and any officer,
director or controlling person of the Holder) and any underwriters
acting on behalf of the Holder against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement of any material
facts contained in any registration statement filed pursuant hereto, or
any document relating thereto, including all amendments and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and will reimburse the Holder (or such other aforementioned parties) or
such underwriters for any legal and all other expenses reasonably
incurred in accordance with investigating or defending any such claim,
loss, damage, liability or action; provided, however, that the Company
will not be liable where the untrue or alleged untrue statement or
omission or alleged omission is based upon information furnished in
writing to the Company by the Holder or any underwriter obtained by the
Holder expressly for use therein, or as a result of the Holder's or any
such underwriter's failure to furnish to the Company information duly
requested in writing by counsel for the Company specifically for use
therein; provided that with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this paragraph shall
not inure to the benefit of any underwriter from whom the person
asserting such losses, claims, damages or liability purchased the
securities concerned, to the extent that any such loss, claim, damage
or liability of such underwriter results from the fact that a copy of
the prospectus was not sent or given to such person at or prior to the
11
written confirmation of the sale of such securities to such person.
This indemnity agreement shall be in addition to any other liability
the Company may have. The indemnity agreement of the Company contained
in this paragraph (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the
Warrant Shares.
(v) The Holder will indemnify the Company (and any officer,
director or controlling person of the Company) and any underwriters
acting on behalf of the Company against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement filed pursuant
hereto, or any document relating thereto, including all amendments, and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and, will reimburse the Company (or such other aforementioned parties)
or such underwriters for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability, or action; provided, however, that the Holder
will be liable as aforesaid only to the extent that such untrue or
alleged untrue statement or omission or alleged omission is based upon
information furnished in writing to the Company by the Holder or any
underwriter obtained by the Holder expressly for use therein, or as a
result of its or such underwriter's failure to furnish the Company with
information duly requested in writing by counsel for the Company
specifically for use therein. This indemnity agreement contained in
this paragraph (v) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Warrant
Shares.
(vi) Promptly after receipt by an indemnified party under this
subsection 10.4 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party, promptly notify the indemnifying party
of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
12
have to any indemnified party otherwise than under this subsection
10.4. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this subsection 10.4 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation or
out-of-pocket expenses or losses or cost incurred in collaborating in
the defense.
(vii) Except as set forth in subsection 10.4(viii), the Company
shall bear all costs and expenses incident to any registration pursuant
to this Section 10.
(viii) The Holder shall pay any and all underwriters' discounts,
brokerage fees and transfer taxes incident to the sale of any
securities sold by such Holder pursuant to this Section 10, and shall
pay the fees and expenses of any special attorneys or accountants
retained by it.
(ix) If the filing of any registration statement pursuant to
subsection 10.4 would require the Company to obtain audited financial
statements other than its normal year end audit required for the filing
of its reports required under the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company may defer the filing of such registration
statement until the necessary audited financial statements are
available, unless the Holder arranges for the payment of the expense of
such audit to the extent that such expense would exceed the amount
which the Company would otherwise be required to bear in connection
with its normal audit schedule for reporting under the Exchange Act.
10.5 If the indemnification provided for in this Section 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 each indemnifying party shall in lieu of indemnifying
such indemnified party 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 Company, on the one hand, and the seller of such Warrant Shares, on
13
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 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 Company, on the one hand, or the
sellers of such Warrant Shares, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the holder hereof agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if all of the sellers of such Warrant
Shares were treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations referred
to above. The amount paid or payable by 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 which reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions of this
Section, in no event shall the amount contributed by any seller from the sale of
Warrant Shares to which such contribution claim relates. No person guilty of
fraudulent misrepresentations (within the meaning of section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. Each Holder of this Warrant and each Holder of
Warrant Shares bearing the legend required by Section 10.6, by acceptance hereof
or thereof, as the case may be, agrees to the indemnification and contribution
provisions of this Section 10.5.
10.6 Legend. In case any shares are issued upon the exercise
in whole or in part of this Warrant or are thereafter transferred, in either
case under such circumstances that no registration under the Act is required or
effective, each certificate representing such shares shall bear on the face
thereof the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and any
transfer thereof is subject to the conditions specified in the Warrant
dated as of _______________, 1996 originally issued by PlayNet
Technologies, Inc. (the "Company") to Xxxxxx Eblagon Leasing Ltd. to
purchase shares of Common Stock, $.001 par value, of the Company. A
copy of the form of such Warrant is on file with the Secretary of the
Company in New York, New York, and will be furnished without charge by
the Company to the holder of this certificate upon written request to
the Secretary of the Company at such address."
14
11. Miscellaneous
11.1 Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of New York.
11.2 Holder Not a Stockholder. Prior to the exercise of this
Warrant, the holder hereof shall not be entitled to any of the rights of a
stockholder of the Company including, without limitation, the right as a
stockholder to (a) vote on or consent to any proposed action of the Company or
(b) receive (i) dividends or any distributions made to stockholders, (ii) notice
of or attend any meetings of stockholders of the Company or (iii) notice of any
other proceedings of the Company.
11.3 Notices. Any notice, demand or delivery to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if sent by first class mail, postage prepaid, addressed to (a) the holder of
this Warrant or issued Warrant Shares at its last known address appearing on the
books at the Company maintained for such purposes or (b) the Company at its
principal offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
General Counsel. The Holder of this Warrant and the Company may each designate a
different address by notice to the other pursuant to this Section 11.3.
11.4 Investment Representation. The Holder represents that it
is purchasing the Warrant and all shares issuable upon exercise of this Warrant
for its own account and not as nominee or agent for any other person and not
with a view to, or for offer or sale in connection with any distribution thereof
(within the meaning of the Act) that would be in violation of the applicable
securities laws; provided, however, that subject to the restrictions contained
in Section 10, that the disposition of all or any part of such shares shall at
all times be within the Holder's exclusive control.
11.5 Confidentiality of Information. The Holder of this
Warrant (and any affiliates of the Holder) and any permitted transferee of this
Warrant will treat all documents, financial statements, reports and other
information delivered pursuant to this Warrant on a confidential basis with the
same degree of care it treats similar information of other companies of which it
holds securities and has investment banking relationships.
15
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________, 1996.
PLAYNET TECHNOLOGIES, INC.
By:________________________
Name:
Title:
16
EXHIBIT A
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of PlayNet Technologies, Inc. (the "Company") and herewith makes payment
therefor in the amount of $_________, all on the terms and conditions specified
in the within Warrant, and requests that a certificate (or ______ certificates
in denominations of ______ shares) for the shares of Common Stock of the Company
hereby purchased be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) ________, whose address is _______________ and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for that
portion of the Warrant not exercised hereby be issued in the name of and
delivered to (choose one) (a) the undersigned or (b) ______________, whose
address is _______________________.
The undersigned represents that it is purchasing the
securities described above for its own account and not as a nominee or agent for
any other person and not with a view to, or for offer of sale in connection
with, any distribution thereof (within the meaning of the Securities Act of
1933) that would be in violation of the applicable securities laws; provided,
however, that subject to the restrictions contained in Section 10 of the Warrant
that the disposition of all or any part of such shares shall at all times be
within the undersigned's exclusive control.
Dated: __________________
By:________________________________
(signature of Registered Holder)
Signature Guaranteed:
________________________
By:_____________________
Title:
NOTICE: The signature to this Notice must correspond with the name as
written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Notice must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
17
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant
to Section 7 of the Warrant Certificate accompanying this Notice of Conversion,
that number of shares of Common Stock issuable upon exercise of the Warrant for
an aggregate purchase price of $_______ into that number of shares of Common
Stock of the Company to be received by the undersigned pursuant to the
provisions of Section 7.1 of the accompanying Warrant Certificate.
Dated: _______________ ____________________________
Name of Holder
____________________________
Signature
Address:
____________________________
____________________________
____________________________
Signature Guaranteed:
________________________
By:_____________________
Title:
18
ASSIGNMENT FORM
---------------
(To be executed only upon the
assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the
within Warrant hereby sells, assigns and transfers unto _____________________,
whose address is ________________________, all of the rights of the undersigned
under the within Warrant, with respect to the receipt of shares of Common Stock
of PlayNet Technologies, Inc. and, if such sale, assignment or transfer is for
less than the right to the receipt of all shares of Common Stock to which the
Holder is entitled upon exercise of such Warrant, that a new Warrant of like
tenor for that portion of the Warrant not being transferred hereunder be issued
in the name of and delivered to the undersigned, and does hereby irrevocably
constitute and appoint ______________ Attorney to register such transfer on the
books of the Company maintained for the purpose, with full power of substitution
in the premises.
Dated: _____________, 19__.
By:________________________________
(Signature of Registered Holder)
Signature Guaranteed:
__________________________
By:_______________________
Title:
NOTICE: The signature to this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Assignment must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
19
EXHIBIT 5 - Form of
Tranche 1 Warrant
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT.
PLAYNET TECHNOLOGIES, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received ____________________ or registered assigns (the
"Holder") is the owner of this warrant ("Warrant") which entitles the Holder
hereof to purchase, at any time from the date which is either (i) one year from
the date of the closing on or prior to the Five Month Date of a Qualified Public
Offering or closing on or prior to the Five Month Date of a Qualified Private
Placement (all as defined below) or (ii) if no such Qualified Public Offering or
Qualified Private Placement closes on or prior to the Five Month Date, one year
from the date of issuance hereof ((i) and (ii) singularly and collectively,the
"Exercise Date") through and including the Expiration Date (hereinafter
defined), such number of fully paid and non-assessable shares of Common Stock,
$.01 par value ("Common Stock"), of PlayNet Technologies, Inc., a Delaware
corporation (the "Company") calculated as follows:
- in the event of the closing of a Qualified Public Offering on
or prior to the date which is five months from the issuance of
this Warrant (the "Five Month Date"):
$[fill in principal amount of Senior Note]
75% X --------------------------------------------
the per share price of the common stock
offered in such Qualified Public Offering
-- in the event that such Qualified Public Offering is not closed
on or prior to the Five Month Date but a Qualified Private
Placement is closed on or prior to the Five Month Date:
$[fill in principal amount of Senior Note]
75% X --------------------------------------------
the lowest per share price of the
common stock offered in such
Qualified Private Placement
--- in the event that a Qualified Public Offering or Qualified
Private Placement is not closed on or prior to the Five Month
Date:
$[fill in principal amount of Senior Note]
75% X --------------------------------------------
$5.00
(each formula subject to adjustment as hereinafter provided).
For purposes of this Warrant, the term "Qualified Public
Offering" shall mean the closing of any public offering of Common Stock of the
Company raising gross proceeds of at least $15 million to the Company and the
term "Qualified Private Placement" shall mean the closing of any privately
arranged financing transaction or series of transactions raising in the
aggregate gross proceeds of at least $15 million to the Company.
1. Warrant; Purchase Price
This Warrant shall entitle the Holder initially to purchase
shares of Common Stock of the Company as calculated above and the purchase price
payable upon exercise of the Warrants shall be, (i) in the event of the closing
of a Qualified Public Offering on or prior to the Five Month Date, the per share
price of the Common Stock Offered in such Qualified Public Offering, (ii) in the
event that such a Qualified Public Offering is not closed on or prior to the
Five Month Date but a Qualified Private Placement is closed on or prior to the
Five Month Date, the lowest per share price of the Common Stock offered in such
Qualified Private Placement, or (iii) in the event that such Qualified Public
Offering or Qualified Private Placement is not closed on or prior to the Five
Month Date, $5.00 per share of Common Stock (each of (i), (ii) and (iii) the
"Relevant Purchase Price" and together the "Relevant Purchase Prices"). The
Relevant Purchase Price and number of shares of Common Stock issuable upon
exercise of this Warrant are subject to adjustment as provided in Article 6. The
shares of Common Stock issuable upon exercise of this Warrant (and/or other
shares of common stock so issuable by reason of any adjustments pursuant to
Article 6) are sometimes referred to herein as the "Warrant Shares." The
aggregate purchase price for the shares of Common Stock of the Company to be
received by the Holder hereof upon exercise of this Warrant shall be payable, at
the option of the Holder, either (i) in cash in lawful money of the United
States of America or by certified or cashier's check; or (ii) if such Holder is
[Name of Holder], by cancellation, in whole or in part, of that certain
$[Principal Amount of Note] Senior Secured Note issued to [Name of Holder] on
[Month, Day] , 199_; or (iii) as otherwise provided herein.
2
2. Exercise; Expiration Date
2.1 This Warrant is exercisable, at the option of the Holder,
in whole or in part at any time and from time to time from the Exercise Date
through and including the Expiration Date (the "Exercise Period"), upon
surrender of this Warrant Certificate to the Company together with a duly
completed Notice of Exercise, in the form attached hereto as Exhibit A, and
payment of an amount equal to the Relevant Purchase Price times the number of
shares of Common Stock to be received upon exercise of this Warrant. In the case
the Holder hereof elects to exercise this Warrant for less than all the shares
of Common Stock of the Company represented by this Warrant Certificate, the
Company shall cancel this Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate providing for the exercise
of the balance of such shares of Common Stock.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on the date which is five years from the date of the issuance of this
Warrant, or if such day shall in the State of New York be a holiday or a day on
which banks are authorized to close, then 5:00 p.m. local time in the State of
New York the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of this Warrant and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 The Company shall register upon its books any transfer of
this Warrant Certificate, upon surrender of same to the Company with a written
instrument of transfer duly executed by the registered Holder or by a duly
authorized attorney. Upon any such registration of transfer, new Warrant
Certificate(s) shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled by the Company. A Warrant Certificate may also be
exchanged, at the option of the Holder, for new Warrant Certificates of
different denominations representing an aggregate purchase price of $ .
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of this Warrant, such number of shares as shall then be
issuable upon the exercise of this Warrant. The Company covenants that all
shares of capital stock which shall be issuable upon exercise of this Warrant
3
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof, and that upon
issuance such shares shall be listed on each national securities exchange, if
any, on which the other shares of such outstanding series of capital stock of
the Company are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate replacing
such Warrant Certificate.
6. Adjustment of Relevant Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Relevant Purchase Price with respect to the Warrant
Shares shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock through
stock split or otherwise, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv)
issue by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation) other securities of the
Company, or (v) in case of a consolidation or merger of the Company
with or into another corporation or in case of the sale or transfer of
all or substantially all of the assets of the Company (hereinafter, a
"Reorganization Transaction"), the number and/or nature of Warrant
Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to
receive the kind and number of Warrant Shares or other securities of
the Company (or of any successor company) which he would have owned or
have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. An
4
adjustment made pursuant to this paragraph (a) shall become effective
retroactively as of the record date of such event.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock, or all holders of Common Stock shall otherwise
become entitled to receive, shares of capital stock of the Company
(other than dividends or distributions on its Common Stock referred to
in paragraph (a) above), evidences of its indebtedness or rights,
options, warrants or convertible securities providing the right to
subscribe for or purchase any shares of the Company's capital stock or
evidences of its indebtedness, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of Warrant Shares theretofore
purchasable upon the exercise of this Warrant, by a fraction, of which
the numerator shall be the then Market Price Per Share of the Warrant
Shares (as determined pursuant to Section 9.2) on the record date
mentioned below in this paragraph (b), and of which the denominator
shall be the then Market Price Per Share of the Warrant Shares on such
record date less the then fair value (as determined by the Board of
Directors of the Company, in good faith) of the portion of the shares
of the Company's capital stock other than Common Stock, evidences of
indebtedness, or of such rights, options, warrants or convertible
securities, distributable with respect to each Warrant Share. Such
adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the
determination of shareholders entitled to receive such distribution.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as provided in this Section 6.1,
the Relevant Purchase Prices with respect to the Warrant Shares shall
be adjusted by multiplying such Relevant Purchase Prices immediately
prior to such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares so purchasable
immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under this Warrant, or in the Relevant Purchase Prices with respect to the
Warrant Shares, shall be required unless such adjustment would require an
increase or decrease of at least 1% in the number of Warrant Shares issuable
upon the exercise of such Warrant, or in the Relevant Purchase Prices thereof;
provided, however, that any adjustments which by reason of this Section 6.3 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All final results of adjustments to the number of Warrant
Shares and the Relevant Purchase Prices thereof shall be rounded to the nearest
one thousandth of a share or the nearest cent, as the case may be. Anything in
5
this Section 6 to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the number of Warrant Shares
purchasable upon the exercise of each Warrant, or in the Relevant Purchase
Prices thereof, in addition to those required by such Section, as it in its
discretion shall determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights, warrants or options
to purchase Common Stock, or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions of cash out
of retained earnings) or convertible or exchangeable securities hereafter made
by the Company to the holders of its Common Stock shall not result in any tax to
the holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Relevant Purchase Price of such Warrant Shares
is adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chief Financial Officer or
Secretary of the Company, which sets forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and each of the then Relevant
Purchase Prices of such Warrant Shares after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
6.4 In the event that at any time prior to the expiration of
this Warrant and prior to their exercise:
(a) the Company shall declare any distribution (other than a
cash dividend or a dividend payable in securities of the Company with
respect to the Common Stock); or
(b) the Company shall offer for subscription to all the
holders of the Common Stock any additional shares of stock of any class
or any other securities convertible into Common Stock or any rights to
subscribe thereto; or
(c) the Company shall declare any stock split, stock dividend,
subdivision, combination, or similar distribution with respect to the
Common Stock that shall affect the outstanding number of shares of
Common Stock; or
6
(d) the Company shall declare a dividend, other than a
dividend payable in shares of the Company's own Common Stock; or
(e) there shall be any capital change in the Company as set
forth in Section 6.1(a)(v); or
(f) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company (other than in connection
with a consolidation, merger, or sale of all or substantially all of
its property, assets and business as an entity);
(each such event hereinafter being referred to as a "Notification Event"), the
Company shall cause to be mailed to the Holder, not less than 20 days prior to
the record date, if any, in connection with such Notification Event (provided,
however, that if there is no record date, 20 days prior to the effective date,
or in either case if 20 days prior notice is impracticable, as soon as
practicable) written notice specifying the nature of such event and the
effective date of, or the date on which the books of the Company shall close or
a record shall be taken with respect to, such event. Such notice shall also set
forth facts indicating the effect of such action (to the extent such effect may
be known at the date of such notice) on each of the Relevant Purchase Prices and
the kind and amount of the shares of stock or other securities or property
deliverable upon exercise of this Warrant.
6.5 The form of Warrant Certificate need not be changed
because of any change in the Relevant Purchase Prices, the number of Warrant
Shares issuable upon the exercise of a Warrant or the number of Warrants
outstanding pursuant to this Section 6, and Warrant Certificates issued before
or after such change may state the same Relevant Purchase Prices, the same
number of Warrants, and the same number of Warrant Shares issuable upon exercise
of Warrants as are stated in the Warrant Certificates theretofore issued
pursuant to this Agreement. The Company may, however, at any time, in its sole
discretion, make any change in the form of Warrant Certificate that it may deem
appropriate and that does not affect the substance thereof, and any Warrant
Certificates thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
7. Conversion Rights
7.1 After the occurrence of any Reorganization Transaction (as
such term is defined in Section 6.1(a)(v)), in lieu of exercise of any portion
of this Warrant as provided in Section 2.1 hereof, the Warrant Shares
represented by this Warrant Certificate (or any portion thereof) may, at the
election of the Holder, be converted into the nearest whole number of shares of
Common Stock of the Company (or other securities of the Company or any successor
7
Company underlying the Warrant) equal to: (1) the product of (a) the number of
shares of Common Stock (or such other securities) then issuable upon the
exercise of this Warrant to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Relevant Purchase Prices in effect on
the business day next preceding the date of conversion, divided by (2) the
Market Price Per Share with respect to the date of conversion.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while this
Warrant remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company (or any successor company), at its
offices, this Warrant Certificate accompanied by a duly completed Notice of
Conversion in the form attached hereto as Exhibit B. The Warrants (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant Certificate for conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the conversion
date, the Company (or the successor company) shall issue and shall deliver to
the Holder (i) a certificate or certificates representing the number of shares
of Common Stock (or such other securities) to which the Holder shall be entitled
as a result of the conversion, and (ii) if the Warrant Certificate is being
converted in part only, a new certificate of like tenor and date for the balance
of the unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
this Warrant, reduce the then current Relevant Purchase Prices to any amount
deemed appropriate by the Board of Directors of the Company and/or extend the
date of the expiration of the Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of this Warrant. This Warrant may not be
exercised in such number as would result (except for the provisions of this
paragraph) in the issuance of a fraction of a share of Common Stock unless the
Holder is exercising this Warrant for all shares of Common Stock to be received
by the Holder hereunder. In such event, the Company shall, upon the exercise of
the entirety of this Warrant, issue to the Holder the largest aggregate whole
8
number of shares of Common Stock called for thereby upon receipt of the Relevant
Purchase Price for all shares of Common Stock to be issued upon exercise hereof
and pay a sum in cash equal to the remaining fraction of a share of Common
Stock, multiplied by its Market Price Per Share (as determined pursuant to
Section 9.2 below) as of the last business day preceding the date on which this
Warrant are presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock of the Company (or any other securities
of the Company or of any successor company) on any date shall mean the closing
price per share of such class or series of securities for the trading day
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company (or other securities of the Company or of such successor company)
are listed or admitted to trading or, if applicable, the last sale price, or in
case no sale takes place on such day, the average of the closing bid and asked
prices of such securities on NASDAQ or any comparable system, or if such
securities are not reported on NASDAQ, or a comparable system, the average of
the closing bid and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If such bid and asked prices are not available, then
"Market Price Per Share" shall be equal to the fair market value of the such
securities as determined in good faith by the Board of Directors of the Company
(or of such successor company).
10. Restrictions on Transfer; Registration Rights
10.1 No sale, transfer, assignment, hypothecation or other
disposition of this Warrant or Warrant Shares shall be made unless any such
transfer, assignment or other disposition will comply with the rules and
statutes administered by the Securities and Exchange Commission and (i) a
Registration Statement under the Securities Act of 1933, as amended (the "Act"),
including such shares is currently in effect, or (ii) in the opinion of counsel
a current Registration Statement is not required for such disposition of the
shares.
10.2 In the event of a proposed sale or transfer of this
Warrant or Warrant Shares in a transaction other than a sale pursuant to a
public offering registered under the Act, a Holder shall deliver to the Company
an opinion of counsel addressed to the Company (which shall be rendered by
counsel reasonably acceptable to the Company) to the effect that the proposed
transfer may be effected without registration or qualification under any Federal
9
or state securities or blue sky law. Such counsel rendering the opinion shall,
as promptly as practicable, notify the Company and the Holder of such opinion
and of the terms and conditions, if any, to be observed in such transfer,
whereupon the Holder shall be entitled to transfer this Warrant or the Warrant
Shares (or a portion thereof).
10.3 The Company agrees that, at any time or times hereafter,
until the second anniversary of the Expiration Date of this Warrant, as and when
it intends to register any of its securities under the Act, whether for its own
account and/or on behalf of selling stockholders (except in connection with an
offering solely to its employees, an offering pursuant to an employee benefit
plan, a dividend or interest reinvestment plan, or an offering solely related to
an acquisition on a Form S-4 or any subsequent similar form) permitting a
secondary offering or distribution the Company will notify the Holder of such
intention and, upon request from the Holder, will use its best efforts to cause
the Warrant Shares designated by the Holder to be registered under the
Securities Act. The number of Warrant Shares to be included in such offering may
be reduced if and to the extent that the underwriter of securities included in
the registration statement and offered by the Company shall be of the opinion
that such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that the percentage of the
reduction of such Warrant Shares shall be no greater than the percentage
reduction of securities of other selling stockholders, as such percentage
reductions are determined in the good faith judgment of the Company. The Company
will use its best efforts to keep each such Registration Statement current for
such period of time as is not otherwise burdensome to the Company.
10.4 Any registration statement referred to in subsection 10.3
hereof shall be prepared and processed in accordance with the following terms
and conditions:
(i) the Holder will cooperate in furnishing promptly to the
Company in writing any information requested by the Company in
connection with the preparation, filing and processing of such
registration statement.
(ii) to the extent requested by an underwriter of securities
included in the registration statement and offered by the Company, the
Holder will defer the sale of Warrant Shares for a period commencing
twenty (20) days prior and terminating sixty (60) days after the
effective date of the registration statement, provided that any
principal shareholders of the Company who also have shares included in
the registration statement will also defer their sales for a similar
10
period, except for sales pursuant to registrations on Form S-8 or S-4
or any similar or successor forms thereto.
(iii) The Company will furnish to the Holder such number of
prospectuses or other documents incident to such registration as may
from time to time be reasonably requested, and cause its shares to be
qualified under the blue-sky laws of those states reasonably requested
by the Holder.
(iv) The Company will indemnify the Holder (and any officer,
director or controlling person of the Holder) and any underwriters
acting on behalf of the Holder against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement of any material
facts contained in any registration statement filed pursuant hereto, or
any document relating thereto, including all amendments and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and will reimburse the Holder (or such other aforementioned parties) or
such underwriters for any legal and all other expenses reasonably
incurred in accordance with investigating or defending any such claim,
loss, damage, liability or action; provided, however, that the Company
will not be liable where the untrue or alleged untrue statement or
omission or alleged omission is based upon information furnished in
writing to the Company by the Holder or any underwriter obtained by the
Holder expressly for use therein, or as a result of the Holder's or any
such underwriter's failure to furnish to the Company information duly
requested in writing by counsel for the Company specifically for use
therein; provided that with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this paragraph shall
not inure to the benefit of any underwriter from whom the person
asserting such losses, claims, damages or liability purchased the
securities concerned, to the extent that any such loss, claim, damage
or liability of such underwriter results from the fact that a copy of
the prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such securities to such person.
This indemnity agreement shall be in addition to any other liability
the Company may have. The indemnity agreement of the Company contained
in this paragraph (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
11
indemnified party and shall survive the delivery of and payment for the
Warrant Shares.
(v) The Holder will indemnify the Company (and any officer,
director or controlling person of the Company) and any underwriters
acting on behalf of the Company against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement filed pursuant
hereto, or any document relating thereto, including all amendments, and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and, will reimburse the Company (or such other aforementioned parties)
or such underwriters for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability, or action; provided, however, that the Holder
will be liable as aforesaid only to the extent that such untrue or
alleged untrue statement or omission or alleged omission is based upon
information furnished in writing to the Company by the Holder or any
underwriter obtained by the Holder expressly for use therein, or as a
result of its or such underwriter's failure to furnish the Company with
information duly requested in writing by counsel for the Company
specifically for use therein. This indemnity agreement contained in
this paragraph (v) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Warrant
Shares.
(vi) Promptly after receipt by an indemnified party under this
subsection 10.4 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party, promptly notify the indemnifying party
of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this subsection
10.4. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this subsection 10.4 for any legal or other expenses
12
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation or
out-of-pocket expenses or losses or cost incurred in collaborating in
the defense.
(vii) Except as set forth in subsection 10.4(viii), the Company
shall bear all costs and expenses incident to any registration pursuant
to this Section 10.
(viii) The Holder shall pay any and all underwriters' discounts,
brokerage fees and transfer taxes incident to the sale of any
securities sold by such Holder pursuant to this Section 10, and shall
pay the fees and expenses of any special attorneys or accountants
retained by it.
(ix) If the filing of any registration statement pursuant to
subsection 10.4 would require the Company to obtain audited financial
statements other than its normal year end audit required for the filing
of its reports required under the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company may defer the filing of such registration
statement until the necessary audited financial statements are
available, unless the Holder arranges for the payment of the expense of
such audit to the extent that such expense would exceed the amount
which the Company would otherwise be required to bear in connection
with its normal audit schedule for reporting under the Exchange Act.
10.5 If the indemnification provided for in this Section 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 each indemnifying party shall in lieu of indemnifying
such indemnified party 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 Company, on the one hand, and the seller of such Warrant Shares, 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 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 Company, on the one hand, or the
sellers of such Warrant Shares, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the holder hereof agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if all of the sellers of such Warrant
Shares were treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations referred
13
to above. The amount paid or payable by 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 which reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions of this
Section, in no event shall the amount contributed by any seller from the sale of
Warrant Shares to which such contribution claim relates. No person guilty of
fraudulent misrepresentations (within the meaning of section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. Each Holder of this Warrant and each Holder of
Warrant Shares bearing the legend required by Section 10.6, by acceptance hereof
or thereof, as the case may be, agrees to the indemnification and contribution
provisions of this Section 10.5.
10.6 Legend. In case any shares are issued upon the exercise
in whole or in part of this Warrant or are thereafter transferred, in either
case under such circumstances that no registration under the Act is required or
effective, each certificate representing such shares shall bear on the face
thereof the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and any
transfer thereof is subject to the conditions specified in the Warrant
dated as of [Include Date] originally issued by PlayNet Technologies,
Inc. (the "Company") to [Include Name of Holder] to purchase shares of
Common Stock, $.001 par value, of the Company. A copy of the form of
such Warrant is on file with the Secretary of the Company in New York,
New York, and will be furnished without charge by the Company to the
holder of this certificate upon written request to the Secretary of the
Company at such address."
11. Miscellaneous
11.1 Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of New York.
11.2 Holder Not a Stockholder. Prior to the exercise of this
Warrant, the holder hereof shall not be entitled to any of the rights of a
stockholder of the Company including, without limitation, the right as a
stockholder to (a) vote on or consent to any proposed action of the Company or
(b) receive (i) dividends or any distributions made to stockholders, (ii) notice
14
of or attend any meetings of stockholders of the Company or (iii) notice of any
other proceedings of the Company.
11.3 Notices. Any notice, demand or delivery to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if sent by first class mail, postage prepaid, addressed to (a) the holder of
this Warrant or issued Warrant Shares at its last known address appearing on the
books at the Company maintained for such purposes or (b) the Company at its
principal offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
General Counsel. The Holder of this Warrant and the Company may each designate a
different address by notice to the other pursuant to this Section 11.3.
11.4 Investment Representation. The Holder represents that it
is purchasing the Warrant and all shares issuable upon exercise of this Warrant
for its own account and not as nominee or agent for any other person and not
with a view to, or for offer or sale in connection with any distribution thereof
(within the meaning of the Act) that would be in violation of the applicable
securities laws; provided, however, that subject to the restrictions contained
in Section 10, that the disposition of all or any part of such shares shall at
all times be within the Holder's exclusive control.
11.5 Confidentiality of Information. The Holder of this
Warrant (and any affiliates of the Holder) and any permitted transferee of this
Warrant will treat all documents, financial statements, reports and other
information delivered pursuant to this Warrant on a confidential basis with the
same degree of care it treats similar information of other companies of which it
holds securities and has investment banking relationships.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________, 199_.
PLAYNET TECHNOLOGIES, INC.
By:_____________________
Name:
Title:
15
EXHIBIT A
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of PlayNet Technologies, Inc. (the "Company") and herewith makes payment
therefor in the amount of $_________, all on the terms and conditions specified
in the within Warrant, and requests that a certificate (or ______ certificates
in denominations of ______ shares) for the shares of Common Stock of the Company
hereby purchased be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) ________, whose address is _______________ and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for that
portion of the Warrant not exercised hereby be issued in the name of and
delivered to (choose one) (a) the undersigned or (b) ______________, whose
address is _______________________.
The undersigned represents that it is purchasing the
securities described above for its own account and not as a nominee or agent for
any other person and not with a view to, or for offer of sale in connection
with, any distribution thereof (within the meaning of the Securities Act of
1933) that would be in violation of the applicable securities laws; provided,
however, that subject to the restrictions contained in Section 10 of the Warrant
that the disposition of all or any part of such shares shall at all times be
within the undersigned's exclusive control.
Dated: __________________
By:________________________________
(signature of Registered Holder)
Signature Guaranteed:
________________________
By:_____________________
Title:
NOTICE: The signature to this Notice must correspond with the name as
written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Notice must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
16
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant
to Section 7 of the Warrant Certificate accompanying this Notice of Conversion,
that number of shares of Common Stock issuable upon exercise of the Warrant for
an aggregate purchase price of $_______ into that number of shares of Common
Stock of the Company to be received by the undersigned pursuant to the
provisions of Section 7.1 of the accompanying Warrant Certificate.
Dated: _______________ ____________________________
Name of Holder
____________________________
Signature
Address:
____________________________
____________________________
____________________________
Signature Guaranteed:
________________________
By:_____________________
Title:
17
ASSIGNMENT FORM
---------------
(To be executed only upon the
assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the
within Warrant hereby sells, assigns and transfers unto _____________________,
whose address is ________________________, all of the rights of the undersigned
under the within Warrant, with respect to the receipt of shares of Common Stock
of PlayNet Technologies, Inc. and, if such sale, assignment or transfer is for
less than the right to the receipt of all shares of Common Stock to which the
Holder is entitled upon exercise of such Warrant, that a new Warrant of like
tenor for that portion of the Warrant not being transferred hereunder be issued
in the name of and delivered to the undersigned, and does hereby irrevocably
constitute and appoint ______________ Attorney to register such transfer on the
books of the Company maintained for the purpose, with full power of substitution
in the premises.
Dated: _____________, 19__.
By:________________________________
(Signature of Registered Holder)
Signature Guaranteed:
___________________________
By:_______________________
Title:
NOTICE: The signature to this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Assignment must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
18
EXHIBIT 6 -
Form of Tranche 2 Warrant
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT.
PLAYNET TECHNOLOGIES, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received _____________________or registered assigns (the
"Holder") is the owner of this warrant ("Warrant") which entitles the Holder
hereof to purchase, at any time from the date which is either (i) one year from
the date of the closing on or prior to the Five Month Date of a Qualified Public
Offering or closing on or prior to the Five Month Date of a Qualified Private
Placement (all as defined below) or (ii) if no such Qualified Public Offering or
Qualified Private Placement closes on or prior to the Five Month Date, one year
from the date of issuance hereof ((i) and (ii) singularly and collectively,the
"Exercise Date") through and including the Expiration Date (hereinafter
defined), such number of fully paid and non-assessable shares of Common Stock,
$.01 par value ("Common Stock"), of PlayNet Technologies, Inc., a Delaware
corporation (the "Company") calculated as follows:
- in the event of the closing of a Qualified Public Offering on
or prior to the date which is five months from the issuance of
this Warrant (the "Five Month Date"):
$[fill in principal amount of Senior Note]
100% X----------------------------------------------
the per share price of the common stock
offered in such Qualified Public Offering
-- in the event that such Qualified Public Offering is not closed
on or prior to the Five Month Date but a Qualified Private
Placement is closed on or prior to the Five Month Date:
$[fill in principal amount of Senior Note]
100% X----------------------------------------------
the lowest per share price of the
common stock offered in such
Qualified Private Placement
--- in the event that a Qualified Public Offering or Qualified
Private Placement is not closed on or prior to the Five Month
Date:
$[fill in principal amount of Senior Note]
100% X----------------------------------------------
$3.50
(each formula subject to adjustment as hereinafter provided).
For purposes of this Warrant, the term "Qualified Public
Offering" shall mean the closing of any public offering of Common Stock of the
Company raising gross proceeds of at least $15 million to the Company and the
term "Qualified Private Placement" shall mean the closing of any privately
arranged financing transaction or series of transactions raising in the
aggregate gross proceeds of at least $15 million to the Company.
1. Warrant; Purchase Price
This Warrant shall entitle the Holder initially to purchase
shares of Common Stock of the Company as calculated above and the purchase price
payable upon exercise of the Warrants shall be, (i) in the event of the closing
of a Qualified Public Offering on or prior to the Five Month Date, the per share
price of the Common Stock Offered in such Qualified Public Offering, (ii) in the
event that such a Qualified Public Offering is not closed on or prior to the
Five Month Date but a Qualified Private Placement is closed on or prior to the
Five Month Date, the lowest per share price of the Common Stock offered in such
Qualified Private Placement, or (iii) in the event that such Qualified Public
Offering or Qualified Private Placement is not closed on or prior to the Five
Month Date, $3.50 per share of Common Stock (each of (i), (ii) and (iii) the
"Relevant Purchase Price" and together the "Relevant Purchase Prices"). The
Relevant Purchase Price and number of shares of Common Stock issuable upon
exercise of this Warrant are subject to adjustment as provided in Article 6. The
shares of Common Stock issuable upon exercise of this Warrant (and/or other
shares of common stock so issuable by reason of any adjustments pursuant to
Article 6) are sometimes referred to herein as the "Warrant Shares." The
aggregate purchase price for the shares of Common Stock of the Company to be
received by the Holder hereof upon exercise of this Warrant shall be payable, at
the option of the Holder, either (i) in cash in lawful money of the United
States of America or by certified or cashier's check; or (ii) if such Holder is
[Name of Holder], by cancellation, in whole or in part, of that certain
$[Principal Amount of Note] Senior Secured Note issued to [Name of Holder] on
[Month, Day], 199_; or (iii) as otherwise provided herein.
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2. Exercise; Expiration Date
2.1 This Warrant is exercisable, at the option of the Holder,
in whole or in part at any time and from time to time from the Exercise Date
through and including the Expiration Date (the "Exercise Period"), upon
surrender of this Warrant Certificate to the Company together with a duly
completed Notice of Exercise, in the form attached hereto as Exhibit A, and
payment of an amount equal to the Relevant Purchase Price times the number of
shares of Common Stock to be received upon exercise of this Warrant. In the case
the Holder hereof elects to exercise this Warrant for less than all the shares
of Common Stock of the Company represented by this Warrant Certificate, the
Company shall cancel this Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate providing for the exercise
of the balance of such shares of Common Stock.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on the date which is five years from the date of the issuance of this
Warrant, or if such day shall in the State of New York be a holiday or a day on
which banks are authorized to close, then 5:00 p.m. local time in the State of
New York the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of this Warrant and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 The Company shall register upon its books any transfer of
this Warrant Certificate, upon surrender of same to the Company with a written
instrument of transfer duly executed by the registered Holder or by a duly
authorized attorney. Upon any such registration of transfer, new Warrant
Certificate(s) shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled by the Company. A Warrant Certificate may also be
exchanged, at the option of the Holder, for new Warrant Certificates of
different denominations representing an aggregate purchase price of $ .
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of this Warrant, such number of shares as shall then be
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issuable upon the exercise of this Warrant. The Company covenants that all
shares of capital stock which shall be issuable upon exercise of this Warrant
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof, and that upon
issuance such shares shall be listed on each national securities exchange, if
any, on which the other shares of such outstanding series of capital stock of
the Company are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate replacing
such Warrant Certificate.
6. Adjustment of Relevant Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Relevant Purchase Price with respect to the Warrant
Shares shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock through
stock split or otherwise, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv)
issue by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation) other securities of the
Company, or (v) in case of a consolidation or merger of the Company
with or into another corporation or in case of the sale or transfer of
all or substantially all of the assets of the Company (hereinafter, a
"Reorganization Transaction"), the number and/or nature of Warrant
Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to
receive the kind and number of Warrant Shares or other securities of
the Company (or of any successor company) which he would have owned or
have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to
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the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
retroactively as of the record date of such event.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock, or all holders of Common Stock shall otherwise
become entitled to receive, shares of capital stock of the Company
(other than dividends or distributions on its Common Stock referred to
in paragraph (a) above), evidences of its indebtedness or rights,
options, warrants or convertible securities providing the right to
subscribe for or purchase any shares of the Company's capital stock or
evidences of its indebtedness, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of Warrant Shares theretofore
purchasable upon the exercise of this Warrant, by a fraction, of which
the numerator shall be the then Market Price Per Share of the Warrant
Shares (as determined pursuant to Section 9.2) on the record date
mentioned below in this paragraph (b), and of which the denominator
shall be the then Market Price Per Share of the Warrant Shares on such
record date less the then fair value (as determined by the Board of
Directors of the Company, in good faith) of the portion of the shares
of the Company's capital stock other than Common Stock, evidences of
indebtedness, or of such rights, options, warrants or convertible
securities, distributable with respect to each Warrant Share. Such
adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the
determination of shareholders entitled to receive such distribution.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as provided in this Section 6.1,
the Relevant Purchase Prices with respect to the Warrant Shares shall
be adjusted by multiplying such Relevant Purchase Prices immediately
prior to such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares so purchasable
immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under this Warrant, or in the Relevant Purchase Prices with respect to the
Warrant Shares, shall be required unless such adjustment would require an
increase or decrease of at least 1% in the number of Warrant Shares issuable
upon the exercise of such Warrant, or in the Relevant Purchase Prices thereof;
provided, however, that any adjustments which by reason of this Section 6.3 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All final results of adjustments to the number of Warrant
Shares and the Relevant Purchase Prices thereof shall be rounded to the nearest
one thousandth of a share or the nearest cent, as the case may be. Anything in
this Section 6 to the contrary notwithstanding, the Company shall be entitled,
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but shall not be required, to make such changes in the number of Warrant Shares
purchasable upon the exercise of each Warrant, or in the Relevant Purchase
Prices thereof, in addition to those required by such Section, as it in its
discretion shall determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights, warrants or options
to purchase Common Stock, or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions of cash out
of retained earnings) or convertible or exchangeable securities hereafter made
by the Company to the holders of its Common Stock shall not result in any tax to
the holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Relevant Purchase Price of such Warrant Shares
is adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chief Financial Officer or
Secretary of the Company, which sets forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and each of the then Relevant
Purchase Prices of such Warrant Shares after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
6.4 In the event that at any time prior to the expiration of
this Warrant and prior to their exercise:
(a) the Company shall declare any distribution (other than a
cash dividend or a dividend payable in securities of the Company with
respect to the Common Stock); or
(b) the Company shall offer for subscription to all the
holders of the Common Stock any additional shares of stock of any class
or any other securities convertible into Common Stock or any rights to
subscribe thereto; or
(c) the Company shall declare any stock split, stock dividend,
subdivision, combination, or similar distribution with respect to the
Common Stock that shall affect the outstanding number of shares of
Common Stock; or
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(d) the Company shall declare a dividend, other than a
dividend payable in shares of the Company's own Common Stock; or
(e) there shall be any capital change in the Company as set
forth in Section 6.1(a)(v); or
(f) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company (other than in connection
with a consolidation, merger, or sale of all or substantially all of
its property, assets and business as an entity);
(each such event hereinafter being referred to as a "Notification Event"), the
Company shall cause to be mailed to the Holder, not less than 20 days prior to
the record date, if any, in connection with such Notification Event (provided,
however, that if there is no record date, 20 days prior to the effective date,
or in either case if 20 days prior notice is impracticable, as soon as
practicable) written notice specifying the nature of such event and the
effective date of, or the date on which the books of the Company shall close or
a record shall be taken with respect to, such event. Such notice shall also set
forth facts indicating the effect of such action (to the extent such effect may
be known at the date of such notice) on each of the Relevant Purchase Prices and
the kind and amount of the shares of stock or other securities or property
deliverable upon exercise of this Warrant.
6.5 The form of Warrant Certificate need not be changed
because of any change in the Relevant Purchase Prices, the number of Warrant
Shares issuable upon the exercise of a Warrant or the number of Warrants
outstanding pursuant to this Section 6, and Warrant Certificates issued before
or after such change may state the same Relevant Purchase Prices, the same
number of Warrants, and the same number of Warrant Shares issuable upon exercise
of Warrants as are stated in the Warrant Certificates theretofore issued
pursuant to this Agreement. The Company may, however, at any time, in its sole
discretion, make any change in the form of Warrant Certificate that it may deem
appropriate and that does not affect the substance thereof, and any Warrant
Certificates thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
7. Conversion Rights
7.1 After the occurrence of any Reorganization Transaction (as
such term is defined in Section 6.1(a)(v)), in lieu of exercise of any portion
of this Warrant as provided in Section 2.1 hereof, the Warrant Shares
represented by this Warrant Certificate (or any portion thereof) may, at the
election of the Holder, be converted into the nearest whole number of shares of
Common Stock of the Company (or other securities of the Company or any successor
Company underlying the Warrant) equal to: (1) the product of (a) the number of
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shares of Common Stock (or such other securities) then issuable upon the
exercise of this Warrant to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Relevant Purchase Prices in effect on
the business day next preceding the date of conversion, divided by (2) the
Market Price Per Share with respect to the date of conversion.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while this
Warrant remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company (or any successor company), at its
offices, this Warrant Certificate accompanied by a duly completed Notice of
Conversion in the form attached hereto as Exhibit B. The Warrants (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant Certificate for conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the conversion
date, the Company (or the successor company) shall issue and shall deliver to
the Holder (i) a certificate or certificates representing the number of shares
of Common Stock (or such other securities) to which the Holder shall be entitled
as a result of the conversion, and (ii) if the Warrant Certificate is being
converted in part only, a new certificate of like tenor and date for the balance
of the unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
this Warrant, reduce the then current Relevant Purchase Prices to any amount
deemed appropriate by the Board of Directors of the Company and/or extend the
date of the expiration of the Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of this Warrant. This Warrant may not be
exercised in such number as would result (except for the provisions of this
paragraph) in the issuance of a fraction of a share of Common Stock unless the
Holder is exercising this Warrant for all shares of Common Stock to be received
by the Holder hereunder. In such event, the Company shall, upon the exercise of
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the entirety of this Warrant, issue to the Holder the largest aggregate whole
number of shares of Common Stock called for thereby upon receipt of the Relevant
Purchase Price for all shares of Common Stock to be issued upon exercise hereof
and pay a sum in cash equal to the remaining fraction of a share of Common
Stock, multiplied by its Market Price Per Share (as determined pursuant to
Section 9.2 below) as of the last business day preceding the date on which this
Warrant are presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock of the Company (or any other securities
of the Company or of any successor company) on any date shall mean the closing
price per share of such class or series of securities for the trading day
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company (or other securities of the Company or of such successor company)
are listed or admitted to trading or, if applicable, the last sale price, or in
case no sale takes place on such day, the average of the closing bid and asked
prices of such securities on NASDAQ or any comparable system, or if such
securities are not reported on NASDAQ, or a comparable system, the average of
the closing bid and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If such bid and asked prices are not available, then
"Market Price Per Share" shall be equal to the fair market value of the such
securities as determined in good faith by the Board of Directors of the Company
(or of such successor company).
10. Restrictions on Transfer; Registration Rights
10.1 No sale, transfer, assignment, hypothecation or other
disposition of this Warrant or Warrant Shares shall be made unless any such
transfer, assignment or other disposition will comply with the rules and
statutes administered by the Securities and Exchange Commission and (i) a
Registration Statement under the Securities Act of 1933, as amended (the "Act"),
including such shares is currently in effect, or (ii) in the opinion of counsel
a current Registration Statement is not required for such disposition of the
shares.
10.2 In the event of a proposed sale or transfer of this
Warrant or Warrant Shares in a transaction other than a sale pursuant to a
public offering registered under the Act, a Holder shall deliver to the Company
an opinion of counsel addressed to the Company (which shall be rendered by
counsel reasonably acceptable to the Company) to the effect that the proposed
transfer may be effected without registration or qualification under any Federal
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or state securities or blue sky law. Such counsel rendering the opinion shall,
as promptly as practicable, notify the Company and the Holder of such opinion
and of the terms and conditions, if any, to be observed in such transfer,
whereupon the Holder shall be entitled to transfer this Warrant or the Warrant
Shares (or a portion thereof).
10.3 The Company agrees that, at any time or times hereafter,
until the second anniversary of the Expiration Date of this Warrant, as and when
it intends to register any of its securities under the Act, whether for its own
account and/or on behalf of selling stockholders (except in connection with an
offering solely to its employees, an offering pursuant to an employee benefit
plan, a dividend or interest reinvestment plan, or an offering solely related to
an acquisition on a Form S-4 or any subsequent similar form) permitting a
secondary offering or distribution the Company will notify the Holder of such
intention and, upon request from the Holder, will use its best efforts to cause
the Warrant Shares designated by the Holder to be registered under the
Securities Act. The number of Warrant Shares to be included in such offering may
be reduced if and to the extent that the underwriter of securities included in
the registration statement and offered by the Company shall be of the opinion
that such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that the percentage of the
reduction of such Warrant Shares shall be no greater than the percentage
reduction of securities of other selling stockholders, as such percentage
reductions are determined in the good faith judgment of the Company. The Company
will use its best efforts to keep each such Registration Statement current for
such period of time as is not otherwise burdensome to the Company.
10.4 Any registration statement referred to in subsection 10.3
hereof shall be prepared and processed in accordance with the following terms
and conditions:
(i) the Holder will cooperate in furnishing promptly to the
Company in writing any information requested by the Company in
connection with the preparation, filing and processing of such
registration statement.
(ii) to the extent requested by an underwriter of securities
included in the registration statement and offered by the Company, the
Holder will defer the sale of Warrant Shares for a period commencing
twenty (20) days prior and terminating sixty (60) days after the
effective date of the registration statement, provided that any
principal shareholders of the Company who also have shares included in
the registration statement will also defer their sales for a similar
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period, except for sales pursuant to registrations on Form S-8 or S-4
or any similar or successor forms thereto.
(iii) The Company will furnish to the Holder such number of
prospectuses or other documents incident to such registration as may
from time to time be reasonably requested, and cause its shares to be
qualified under the blue-sky laws of those states reasonably requested
by the Holder.
(iv) The Company will indemnify the Holder (and any officer,
director or controlling person of the Holder) and any underwriters
acting on behalf of the Holder against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement of any material
facts contained in any registration statement filed pursuant hereto, or
any document relating thereto, including all amendments and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and will reimburse the Holder (or such other aforementioned parties) or
such underwriters for any legal and all other expenses reasonably
incurred in accordance with investigating or defending any such claim,
loss, damage, liability or action; provided, however, that the Company
will not be liable where the untrue or alleged untrue statement or
omission or alleged omission is based upon information furnished in
writing to the Company by the Holder or any underwriter obtained by the
Holder expressly for use therein, or as a result of the Holder's or any
such underwriter's failure to furnish to the Company information duly
requested in writing by counsel for the Company specifically for use
therein; provided that with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this paragraph shall
not inure to the benefit of any underwriter from whom the person
asserting such losses, claims, damages or liability purchased the
securities concerned, to the extent that any such loss, claim, damage
or liability of such underwriter results from the fact that a copy of
the prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such securities to such person.
This indemnity agreement shall be in addition to any other liability
the Company may have. The indemnity agreement of the Company contained
in this paragraph (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
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indemnified party and shall survive the delivery of and payment for the
Warrant Shares.
(v) The Holder will indemnify the Company (and any officer,
director or controlling person of the Company) and any underwriters
acting on behalf of the Company against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement filed pursuant
hereto, or any document relating thereto, including all amendments, and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and, will reimburse the Company (or such other aforementioned parties)
or such underwriters for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability, or action; provided, however, that the Holder
will be liable as aforesaid only to the extent that such untrue or
alleged untrue statement or omission or alleged omission is based upon
information furnished in writing to the Company by the Holder or any
underwriter obtained by the Holder expressly for use therein, or as a
result of its or such underwriter's failure to furnish the Company with
information duly requested in writing by counsel for the Company
specifically for use therein. This indemnity agreement contained in
this paragraph (v) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Warrant
Shares.
(vi) Promptly after receipt by an indemnified party under this
subsection 10.4 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party, promptly notify the indemnifying party
of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this subsection
10.4. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this subsection 10.4 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
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defense thereof, other than reasonable costs of investigation or
out-of-pocket expenses or losses or cost incurred in collaborating in
the defense.
(vii) Except as set forth in subsection 10.4(viii), the
Company shall bear all costs and expenses incident to any registration
pursuant to this Section 10.
(viii) The Holder shall pay any and all underwriters'
discounts, brokerage fees and transfer taxes incident to the sale of
any securities sold by such Holder pursuant to this Section 10, and
shall pay the fees and expenses of any special attorneys or accountants
retained by it.
(ix) If the filing of any registration statement pursuant to
subsection 10.4 would require the Company to obtain audited financial
statements other than its normal year end audit required for the filing
of its reports required under the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company may defer the filing of such registration
statement until the necessary audited financial statements are
available, unless the Holder arranges for the payment of the expense of
such audit to the extent that such expense would exceed the amount
which the Company would otherwise be required to bear in connection
with its normal audit schedule for reporting under the Exchange Act.
10.5 If the indemnification provided for in this Section 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 each indemnifying party shall in lieu of indemnifying
such indemnified party 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 Company, on the one hand, and the seller of such Warrant Shares, 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 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 Company, on the one hand, or the
sellers of such Warrant Shares, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the holder hereof agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if all of the sellers of such Warrant
Shares were treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations referred
to above. The amount paid or payable by 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 which reasonably
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incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions of this
Section, in no event shall the amount contributed by any seller from the sale of
Warrant Shares to which such contribution claim relates. No person guilty of
fraudulent misrepresentations (within the meaning of section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. Each Holder of this Warrant and each Holder of
Warrant Shares bearing the legend required by Section 10.6, by acceptance hereof
or thereof, as the case may be, agrees to the indemnification and contribution
provisions of this Section 10.5.
10.6 Legend. In case any shares are issued upon the exercise
in whole or in part of this Warrant or are thereafter transferred, in either
case under such circumstances that no registration under the Act is required or
effective, each certificate representing such shares shall bear on the face
thereof the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and any
transfer thereof is subject to the conditions specified in the Warrant
dated as of [Include Date] originally issued by PlayNet Technologies,
Inc. (the "Company") to [Include Name of Holder] to purchase shares of
Common Stock, $.001 par value, of the Company. A copy of the form of
such Warrant is on file with the Secretary of the Company in New York,
New York, and will be furnished without charge by the Company to the
holder of this certificate upon written request to the Secretary of the
Company at such address."
11. Miscellaneous
11.1 Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of New York.
11.2 Holder Not a Stockholder. Prior to the exercise of this
Warrant, the holder hereof shall not be entitled to any of the rights of a
stockholder of the Company including, without limitation, the right as a
stockholder to (a) vote on or consent to any proposed action of the Company or
(b) receive (i) dividends or any distributions made to stockholders, (ii) notice
14
of or attend any meetings of stockholders of the Company or (iii) notice of any
other proceedings of the Company.
11.3 Notices. Any notice, demand or delivery to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if sent by first class mail, postage prepaid, addressed to (a) the holder of
this Warrant or issued Warrant Shares at its last known address appearing on the
books at the Company maintained for such purposes or (b) the Company at its
principal offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
General Counsel. The Holder of this Warrant and the Company may each designate a
different address by notice to the other pursuant to this Section 11.3.
11.4 Investment Representation. The Holder represents that it
is purchasing the Warrant and all shares issuable upon exercise of this Warrant
for its own account and not as nominee or agent for any other person and not
with a view to, or for offer or sale in connection with any distribution thereof
(within the meaning of the Act) that would be in violation of the applicable
securities laws; provided, however, that subject to the restrictions contained
in Section 10, that the disposition of all or any part of such shares shall at
all times be within the Holder's exclusive control.
11.5 Confidentiality of Information. The Holder of this
Warrant (and any affiliates of the Holder) and any permitted transferee of this
Warrant will treat all documents, financial statements, reports and other
information delivered pursuant to this Warrant on a confidential basis with the
same degree of care it treats similar information of other companies of which it
holds securities and has investment banking relationships.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________, 199_.
PLAYNET TECHNOLOGIES, INC.
By: _________________________
Name:
Title:
15
EXHIBIT A
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of PlayNet Technologies, Inc. (the "Company") and herewith makes payment
therefor in the amount of $_________, all on the terms and conditions specified
in the within Warrant, and requests that a certificate (or ______ certificates
in denominations of ______ shares) for the shares of Common Stock of the Company
hereby purchased be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) ________, whose address is _______________ and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for that
portion of the Warrant not exercised hereby be issued in the name of and
delivered to (choose one) (a) the undersigned or (b) ______________, whose
address is _______________________.
The undersigned represents that it is purchasing the
securities described above for its own account and not as a nominee or agent for
any other person and not with a view to, or for offer of sale in connection
with, any distribution thereof (within the meaning of the Securities Act of
1933) that would be in violation of the applicable securities laws; provided,
however, that subject to the restrictions contained in Section 10 of the Warrant
that the disposition of all or any part of such shares shall at all times be
within the undersigned's exclusive control.
Dated: __________________
By:________________________________
(signature of Registered Holder)
Signature Guaranteed:
________________________
By:_____________________
Title:
NOTICE: The signature to this Notice must correspond with the name as
written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Notice must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
16
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant
to Section 7 of the Warrant Certificate accompanying this Notice of Conversion,
that number of shares of Common Stock issuable upon exercise of the Warrant for
an aggregate purchase price of $_______ into that number of shares of Common
Stock of the Company to be received by the undersigned pursuant to the
provisions of Section 7.1 of the accompanying Warrant Certificate.
Dated: _______________ ____________________________
Name of Holder
____________________________
Signature
Address:
____________________________
____________________________
____________________________
Signature Guaranteed:
________________________
By:_____________________
Title:
17
ASSIGNMENT FORM
---------------
(To be executed only upon the
assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the
within Warrant hereby sells, assigns and transfers unto _____________________,
whose address is ________________________, all of the rights of the undersigned
under the within Warrant, with respect to the receipt of shares of Common Stock
of PlayNet Technologies, Inc. and, if such sale, assignment or transfer is for
less than the right to the receipt of all shares of Common Stock to which the
Holder is entitled upon exercise of such Warrant, that a new Warrant of like
tenor for that portion of the Warrant not being transferred hereunder be issued
in the name of and delivered to the undersigned, and does hereby irrevocably
constitute and appoint ______________ Attorney to register such transfer on the
books of the Company maintained for the purpose, with full power of substitution
in the premises.
Dated: _____________, 19__.
By:________________________________
(Signature of Registered Holder)
Signature Guaranteed:
___________________________
By:_______________________
Title:
NOTICE: The signature to this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Assignment must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
18
EXHIBIT 7 -
Form of Tranche 3 Warrant
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT.
PLAYNET TECHNOLOGIES, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received _____________________ or registered assigns (the
"Holder") is the owner of this warrant ("Warrant") which entitles the Holder
hereof to purchase, at any time from the date which is either (i) one year from
the date of the closing on or prior to the Five Month Date of a Qualified Public
Offering or closing on or prior to the Five Month Date of a Qualified Private
Placement (all as defined below) and (ii) if no such Qualified Public Offering
or Qualified Private Placement closes on or prior to the Five Month Date, one
year from the date of issuance hereof ((i) and (ii) singularly and
collectively,the "Exercise Date") through and including the Expiration Date
(hereinafter defined), such number of fully paid and non-assessable shares of
Common Stock, $.01 par value ("Common Stock"), of PlayNet Technologies, Inc., a
Delaware corporation (the "Company") calculated as follows:
- in the event of the closing of a Qualified Public Offering on
or prior to the date which is five months from the issuance of
this Warrant (the "Five Month Date"):
$[fill in principal amount of Senior Note]
125% X--------------------------------------------
the per share price of the common stock
offered in such Qualified Public Offering
-- in the event that such Qualified Public Offering is not closed
on or prior to the Five Month Date but a Qualified Private
Placement is closed on or prior to the Five Month Date:
$[fill in principal amount of Senior Note]
125% X--------------------------------------------
the lowest per share price of the
common stock offered in such
Qualified Private Placement
--- in the event that a Qualified Public Offering or Qualified
Private Placement is not closed on or prior to the Five Month
Date:
$[fill in principal amount of Senior Note]
125% X--------------------------------------------
$3.00
(each formula subject to adjustment as hereinafter provided).
For purposes of this Warrant, the term "Qualified Public
Offering" shall mean the closing of any public offering of Common Stock of the
Company raising gross proceeds of at least $15 million to the Company and the
term "Qualified Private Placement" shall mean the closing of any privately
arranged financing transaction or series of transactions raising in the
aggregate gross proceeds of at least $15 million to the Company.
1. Warrant; Purchase Price
This Warrant shall entitle the Holder initially to purchase
shares of Common Stock of the Company as calculated above and the purchase price
payable upon exercise of the Warrants shall be, (i) in the event of the closing
of a Qualified Public Offering on or prior to the Five Month Date, the per share
price of the Common Stock Offered in such Qualified Public Offering, (ii) in the
event that such a Qualified Public Offering is not closed on or prior to the
Five Month Date but a Qualified Private Placement is closed on or prior to the
Five Month Date, the lowest per share price of the Common Stock offered in such
Qualified Private Placement, or (iii) in the event that such Qualified Public
Offering or Qualified Private Placement is not closed on or prior to the Five
Month Date, $3.00 per share of Common Stock (each of (i), (ii) and (iii) the
"Relevant Purchase Price" and together the "Relevant Purchase Prices"). The
Relevant Purchase Price and number of shares of Common Stock issuable upon
exercise of this Warrant are subject to adjustment as provided in Article 6. The
shares of Common Stock issuable upon exercise of this Warrant (and/or other
shares of common stock so issuable by reason of any adjustments pursuant to
Article 6) are sometimes referred to herein as the "Warrant Shares." The
aggregate purchase price for the shares of Common Stock of the Company to be
received by the Holder hereof upon exercise of this Warrant shall be payable, at
the option of the Holder, either (i) in cash in lawful money of the United
States of America or by certified or cashier's check; or (ii) if such Holder is
[Name of Holder], by cancellation, in whole or in part, of that certain
$[Principal Amount of Note] Senior Secured Note issued to [Name of Holder] on
[Month, Day], 199_; or (iii) as otherwise provided herein.
2
2. Exercise; Expiration Date
2.1 This Warrant is exercisable, at the option of the Holder,
in whole or in part at any time and from time to time from the Exercise Date
through and including the Expiration Date (the "Exercise Period"), upon
surrender of this Warrant Certificate to the Company together with a duly
completed Notice of Exercise, in the form attached hereto as Exhibit A, and
payment of an amount equal to the Relevant Purchase Price times the number of
shares of Common Stock to be received upon exercise of this Warrant. In the case
the Holder hereof elects to exercise this Warrant for less than all the shares
of Common Stock of the Company represented by this Warrant Certificate, the
Company shall cancel this Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate providing for the exercise
of the balance of such shares of Common Stock.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on the date which is five years from the date of the issuance of this
Warrant, or if such day shall in the State of New York be a holiday or a day on
which banks are authorized to close, then 5:00 p.m. local time in the State of
New York the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of this Warrant and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 The Company shall register upon its books any transfer of
this Warrant Certificate, upon surrender of same to the Company with a written
instrument of transfer duly executed by the registered Holder or by a duly
authorized attorney. Upon any such registration of transfer, new Warrant
Certificate(s) shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled by the Company. A Warrant Certificate may also be
exchanged, at the option of the Holder, for new Warrant Certificates of
different denominations representing an aggregate purchase price of $ .
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
3
issue upon exercise of this Warrant, such number of shares as shall then be
issuable upon the exercise of this Warrant. The Company covenants that all
shares of capital stock which shall be issuable upon exercise of this Warrant
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof, and that upon
issuance such shares shall be listed on each national securities exchange, if
any, on which the other shares of such outstanding series of capital stock of
the Company are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate replacing
such Warrant Certificate.
6. Adjustment of Relevant Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Relevant Purchase Price with respect to the Warrant
Shares shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock through
stock split or otherwise, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv)
issue by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation) other securities of the
Company, or (v) in case of a consolidation or merger of the Company
with or into another corporation or in case of the sale or transfer of
all or substantially all of the assets of the Company (hereinafter, a
"Reorganization Transaction"), the number and/or nature of Warrant
Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to
receive the kind and number of Warrant Shares or other securities of
the Company (or of any successor company) which he would have owned or
have been entitled to receive after the happening of any of the events
4
described above, had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
retroactively as of the record date of such event.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock, or all holders of Common Stock shall otherwise
become entitled to receive, shares of capital stock of the Company
(other than dividends or distributions on its Common Stock referred to
in paragraph (a) above), evidences of its indebtedness or rights,
options, warrants or convertible securities providing the right to
subscribe for or purchase any shares of the Company's capital stock or
evidences of its indebtedness, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of Warrant Shares theretofore
purchasable upon the exercise of this Warrant, by a fraction, of which
the numerator shall be the then Market Price Per Share of the Warrant
Shares (as determined pursuant to Section 9.2) on the record date
mentioned below in this paragraph (b), and of which the denominator
shall be the then Market Price Per Share of the Warrant Shares on such
record date less the then fair value (as determined by the Board of
Directors of the Company, in good faith) of the portion of the shares
of the Company's capital stock other than Common Stock, evidences of
indebtedness, or of such rights, options, warrants or convertible
securities, distributable with respect to each Warrant Share. Such
adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the
determination of shareholders entitled to receive such distribution.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as provided in this Section 6.1,
the Relevant Purchase Prices with respect to the Warrant Shares shall
be adjusted by multiplying such Relevant Purchase Prices immediately
prior to such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares so purchasable
immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under this Warrant, or in the Relevant Purchase Prices with respect to the
Warrant Shares, shall be required unless such adjustment would require an
increase or decrease of at least 1% in the number of Warrant Shares issuable
upon the exercise of such Warrant, or in the Relevant Purchase Prices thereof;
provided, however, that any adjustments which by reason of this Section 6.3 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All final results of adjustments to the number of Warrant
Shares and the Relevant Purchase Prices thereof shall be rounded to the nearest
one thousandth of a share or the nearest cent, as the case may be. Anything in
this Section 6 to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the number of Warrant Shares
5
purchasable upon the exercise of each Warrant, or in the Relevant Purchase
Prices thereof, in addition to those required by such Section, as it in its
discretion shall determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights, warrants or options
to purchase Common Stock, or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions of cash out
of retained earnings) or convertible or exchangeable securities hereafter made
by the Company to the holders of its Common Stock shall not result in any tax to
the holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Relevant Purchase Price of such Warrant Shares
is adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chief Financial Officer or
Secretary of the Company, which sets forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and each of the then Relevant
Purchase Prices of such Warrant Shares after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
6.4 In the event that at any time prior to the expiration of
this Warrant and prior to their exercise:
(a) the Company shall declare any distribution (other than a
cash dividend or a dividend payable in securities of the Company with
respect to the Common Stock); or
(b) the Company shall offer for subscription to all the
holders of the Common Stock any additional shares of stock of any class
or any other securities convertible into Common Stock or any rights to
subscribe thereto; or
(c) the Company shall declare any stock split, stock dividend,
subdivision, combination, or similar distribution with respect to the
Common Stock that shall affect the outstanding number of shares of
Common Stock; or
6
(d) the Company shall declare a dividend, other than a
dividend payable in shares of the Company's own Common Stock; or
(e) there shall be any capital change in the Company as set
forth in Section 6.1(a)(v); or
(f) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company (other than in connection
with a consolidation, merger, or sale of all or substantially all of
its property, assets and business as an entity);
(each such event hereinafter being referred to as a "Notification Event"), the
Company shall cause to be mailed to the Holder, not less than 20 days prior to
the record date, if any, in connection with such Notification Event (provided,
however, that if there is no record date, 20 days prior to the effective date,
or in either case if 20 days prior notice is impracticable, as soon as
practicable) written notice specifying the nature of such event and the
effective date of, or the date on which the books of the Company shall close or
a record shall be taken with respect to, such event. Such notice shall also set
forth facts indicating the effect of such action (to the extent such effect may
be known at the date of such notice) on each of the Relevant Purchase Prices and
the kind and amount of the shares of stock or other securities or property
deliverable upon exercise of this Warrant.
6.5 The form of Warrant Certificate need not be changed
because of any change in the Relevant Purchase Prices, the number of Warrant
Shares issuable upon the exercise of a Warrant or the number of Warrants
outstanding pursuant to this Section 6, and Warrant Certificates issued before
or after such change may state the same Relevant Purchase Prices, the same
number of Warrants, and the same number of Warrant Shares issuable upon exercise
of Warrants as are stated in the Warrant Certificates theretofore issued
pursuant to this Agreement. The Company may, however, at any time, in its sole
discretion, make any change in the form of Warrant Certificate that it may deem
appropriate and that does not affect the substance thereof, and any Warrant
Certificates thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
7. Conversion Rights
7.1 After the occurrence of any Reorganization Transaction (as
such term is defined in Section 6.1(a)(v)), in lieu of exercise of any portion
of this Warrant as provided in Section 2.1 hereof, the Warrant Shares
represented by this Warrant Certificate (or any portion thereof) may, at the
election of the Holder, be converted into the nearest whole number of shares of
Common Stock of the Company (or other securities of the Company or any successor
7
Company underlying the Warrant) equal to: (1) the product of (a) the number of
shares of Common Stock (or such other securities) then issuable upon the
exercise of this Warrant to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Relevant Purchase Prices in effect on
the business day next preceding the date of conversion, divided by (2) the
Market Price Per Share with respect to the date of conversion.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while this
Warrant remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company (or any successor company), at its
offices, this Warrant Certificate accompanied by a duly completed Notice of
Conversion in the form attached hereto as Exhibit B. The Warrants (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant Certificate for conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the conversion
date, the Company (or the successor company) shall issue and shall deliver to
the Holder (i) a certificate or certificates representing the number of shares
of Common Stock (or such other securities) to which the Holder shall be entitled
as a result of the conversion, and (ii) if the Warrant Certificate is being
converted in part only, a new certificate of like tenor and date for the balance
of the unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
this Warrant, reduce the then current Relevant Purchase Prices to any amount
deemed appropriate by the Board of Directors of the Company and/or extend the
date of the expiration of the Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of this Warrant. This Warrant may not be
exercised in such number as would result (except for the provisions of this
paragraph) in the issuance of a fraction of a share of Common Stock unless the
Holder is exercising this Warrant for all shares of Common Stock to be received
by the Holder hereunder. In such event, the Company shall, upon the exercise of
8
the entirety of this Warrant, issue to the Holder the largest aggregate whole
number of shares of Common Stock called for thereby upon receipt of the Relevant
Purchase Price for all shares of Common Stock to be issued upon exercise hereof
and pay a sum in cash equal to the remaining fraction of a share of Common
Stock, multiplied by its Market Price Per Share (as determined pursuant to
Section 9.2 below) as of the last business day preceding the date on which this
Warrant are presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock of the Company (or any other securities
of the Company or of any successor company) on any date shall mean the closing
price per share of such class or series of securities for the trading day
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company (or other securities of the Company or of such successor company)
are listed or admitted to trading or, if applicable, the last sale price, or in
case no sale takes place on such day, the average of the closing bid and asked
prices of such securities on NASDAQ or any comparable system, or if such
securities are not reported on NASDAQ, or a comparable system, the average of
the closing bid and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If such bid and asked prices are not available, then
"Market Price Per Share" shall be equal to the fair market value of the such
securities as determined in good faith by the Board of Directors of the Company
(or of such successor company).
10. Restrictions on Transfer; Registration Rights
10.1 No sale, transfer, assignment, hypothecation or other
disposition of this Warrant or Warrant Shares shall be made unless any such
transfer, assignment or other disposition will comply with the rules and
statutes administered by the Securities and Exchange Commission and (i) a
Registration Statement under the Securities Act of 1933, as amended (the "Act"),
including such shares is currently in effect, or (ii) in the opinion of counsel
a current Registration Statement is not required for such disposition of the
shares.
10.2 In the event of a proposed sale or transfer of this
Warrant or Warrant Shares in a transaction other than a sale pursuant to a
public offering registered under the Act, a Holder shall deliver to the Company
an opinion of counsel addressed to the Company (which shall be rendered by
counsel reasonably acceptable to the Company) to the effect that the proposed
transfer may be effected without registration or qualification under any Federal
9
or state securities or blue sky law. Such counsel rendering the opinion shall,
as promptly as practicable, notify the Company and the Holder of such opinion
and of the terms and conditions, if any, to be observed in such transfer,
whereupon the Holder shall be entitled to transfer this Warrant or the Warrant
Shares (or a portion thereof).
10.3 The Company agrees that, at any time or times hereafter,
until the second anniversary of the Expiration Date of this Warrant, as and when
it intends to register any of its securities under the Act, whether for its own
account and/or on behalf of selling stockholders (except in connection with an
offering solely to its employees, an offering pursuant to an employee benefit
plan, a dividend or interest reinvestment plan, or an offering solely related to
an acquisition on a Form S-4 or any subsequent similar form) permitting a
secondary offering or distribution the Company will notify the Holder of such
intention and, upon request from the Holder, will use its best efforts to cause
the Warrant Shares designated by the Holder to be registered under the
Securities Act. The number of Warrant Shares to be included in such offering may
be reduced if and to the extent that the underwriter of securities included in
the registration statement and offered by the Company shall be of the opinion
that such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that the percentage of the
reduction of such Warrant Shares shall be no greater than the percentage
reduction of securities of other selling stockholders, as such percentage
reductions are determined in the good faith judgment of the Company. The Company
will use its best efforts to keep each such Registration Statement current for
such period of time as is not otherwise burdensome to the Company.
10.4 Any registration statement referred to in subsection 10.3
hereof shall be prepared and processed in accordance with the following terms
and conditions:
(i) the Holder will cooperate in furnishing promptly to the
Company in writing any information requested by the Company in
connection with the preparation, filing and processing of such
registration statement.
(ii) to the extent requested by an underwriter of securities
included in the registration statement and offered by the Company, the
Holder will defer the sale of Warrant Shares for a period commencing
twenty (20) days prior and terminating sixty (60) days after the
effective date of the registration statement, provided that any
principal shareholders of the Company who also have shares included in
the registration statement will also defer their sales for a similar
10
period, except for sales pursuant to registrations on Form S-8 or S-4
or any similar or successor forms thereto.
(iii) The Company will furnish to the Holder such number of
prospectuses or other documents incident to such registration as may
from time to time be reasonably requested, and cause its shares to be
qualified under the blue-sky laws of those states reasonably requested
by the Holder.
(iv) The Company will indemnify the Holder (and any officer,
director or controlling person of the Holder) and any underwriters
acting on behalf of the Holder against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement of any material
facts contained in any registration statement filed pursuant hereto, or
any document relating thereto, including all amendments and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and will reimburse the Holder (or such other aforementioned parties) or
such underwriters for any legal and all other expenses reasonably
incurred in accordance with investigating or defending any such claim,
loss, damage, liability or action; provided, however, that the Company
will not be liable where the untrue or alleged untrue statement or
omission or alleged omission is based upon information furnished in
writing to the Company by the Holder or any underwriter obtained by the
Holder expressly for use therein, or as a result of the Holder's or any
such underwriter's failure to furnish to the Company information duly
requested in writing by counsel for the Company specifically for use
therein; provided that with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this paragraph shall
not inure to the benefit of any underwriter from whom the person
asserting such losses, claims, damages or liability purchased the
securities concerned, to the extent that any such loss, claim, damage
or liability of such underwriter results from the fact that a copy of
the prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such securities to such person.
This indemnity agreement shall be in addition to any other liability
the Company may have. The indemnity agreement of the Company contained
in this paragraph (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
11
indemnified party and shall survive the delivery of and payment for the
Warrant Shares.
(v) The Holder will indemnify the Company (and any officer,
director or controlling person of the Company) and any underwriters
acting on behalf of the Company against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) to which they
may become subject under the Securities Act or otherwise, arising out
of or based upon any untrue or alleged untrue statement filed pursuant
hereto, or any document relating thereto, including all amendments, and
supplements, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein contained not misleading,
and, will reimburse the Company (or such other aforementioned parties)
or such underwriters for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability, or action; provided, however, that the Holder
will be liable as aforesaid only to the extent that such untrue or
alleged untrue statement or omission or alleged omission is based upon
information furnished in writing to the Company by the Holder or any
underwriter obtained by the Holder expressly for use therein, or as a
result of its or such underwriter's failure to furnish the Company with
information duly requested in writing by counsel for the Company
specifically for use therein. This indemnity agreement contained in
this paragraph (v) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Warrant
Shares.
(vi) Promptly after receipt by an indemnified party under this
subsection 10.4 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party, promptly notify the indemnifying party
of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this subsection
10.4. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this subsection 10.4 for any legal or other expenses
12
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation or
out-of-pocket expenses or losses or cost incurred in collaborating in
the defense.
(vii) Except as set forth in subsection 10.4(viii), the
Company shall bear all costs and expenses incident to any registration
pursuant to this Section 10.
(viii) The Holder shall pay any and all underwriters'
discounts, brokerage fees and transfer taxes incident to the sale of
any securities sold by such Holder pursuant to this Section 10, and
shall pay the fees and expenses of any special attorneys or accountants
retained by it.
(ix) If the filing of any registration statement pursuant to
subsection 10.4 would require the Company to obtain audited financial
statements other than its normal year end audit required for the filing
of its reports required under the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company may defer the filing of such registration
statement until the necessary audited financial statements are
available, unless the Holder arranges for the payment of the expense of
such audit to the extent that such expense would exceed the amount
which the Company would otherwise be required to bear in connection
with its normal audit schedule for reporting under the Exchange Act.
10.5 If the indemnification provided for in this Section 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 each indemnifying party shall in lieu of indemnifying
such indemnified party 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 Company, on the one hand, and the seller of such Warrant Shares, 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 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 Company, on the one hand, or the
sellers of such Warrant Shares, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the holder hereof agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if all of the sellers of such Warrant
Shares were treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations referred
13
to above. The amount paid or payable by 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 which reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions of this
Section, in no event shall the amount contributed by any seller from the sale of
Warrant Shares to which such contribution claim relates. No person guilty of
fraudulent misrepresentations (within the meaning of section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. Each Holder of this Warrant and each Holder of
Warrant Shares bearing the legend required by Section 10.6, by acceptance hereof
or thereof, as the case may be, agrees to the indemnification and contribution
provisions of this Section 10.5.
10.6 Legend. In case any shares are issued upon the exercise
in whole or in part of this Warrant or are thereafter transferred, in either
case under such circumstances that no registration under the Act is required or
effective, each certificate representing such shares shall bear on the face
thereof the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and any
transfer thereof is subject to the conditions specified in the Warrant
dated as of [Include Date] originally issued by PlayNet Technologies,
Inc. (the "Company") to [Include Name of Holder] to purchase shares of
Common Stock, $.001 par value, of the Company. A copy of the form of
such Warrant is on file with the Secretary of the Company in New York,
New York, and will be furnished without charge by the Company to the
holder of this certificate upon written request to the Secretary of the
Company at such address."
11. Miscellaneous
11.1 Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of New York.
11.2 Holder Not a Stockholder. Prior to the exercise of this
Warrant, the holder hereof shall not be entitled to any of the rights of a
stockholder of the Company including, without limitation, the right as a
stockholder to (a) vote on or consent to any proposed action of the Company or
(b) receive (i) dividends or any distributions made to stockholders, (ii) notice
14
of or attend any meetings of stockholders of the Company or (iii) notice of any
other proceedings of the Company.
11.3 Notices. Any notice, demand or delivery to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if sent by first class mail, postage prepaid, addressed to (a) the holder of
this Warrant or issued Warrant Shares at its last known address appearing on the
books at the Company maintained for such purposes or (b) the Company at its
principal offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
General Counsel. The Holder of this Warrant and the Company may each designate a
different address by notice to the other pursuant to this Section 11.3.
11.4 Investment Representation. The Holder represents that it
is purchasing the Warrant and all shares issuable upon exercise of this Warrant
for its own account and not as nominee or agent for any other person and not
with a view to, or for offer or sale in connection with any distribution thereof
(within the meaning of the Act) that would be in violation of the applicable
securities laws; provided, however, that subject to the restrictions contained
in Section 10, that the disposition of all or any part of such shares shall at
all times be within the Holder's exclusive control.
11.5 Confidentiality of Information. The Holder of this
Warrant (and any affiliates of the Holder) and any permitted transferee of this
Warrant will treat all documents, financial statements, reports and other
information delivered pursuant to this Warrant on a confidential basis with the
same degree of care it treats similar information of other companies of which it
holds securities and has investment banking relationships.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________, 199_.
PLAYNET TECHNOLOGIES, INC.
By:__________________________
Name:
Title:
15
EXHIBIT A
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of PlayNet Technologies, Inc. (the "Company") and herewith makes payment
therefor in the amount of $_________, all on the terms and conditions specified
in the within Warrant, and requests that a certificate (or ______ certificates
in denominations of ______ shares) for the shares of Common Stock of the Company
hereby purchased be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) ________, whose address is _______________ and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for that
portion of the Warrant not exercised hereby be issued in the name of and
delivered to (choose one) (a) the undersigned or (b) ______________, whose
address is _______________________.
The undersigned represents that it is purchasing the
securities described above for its own account and not as a nominee or agent for
any other person and not with a view to, or for offer of sale in connection
with, any distribution thereof (within the meaning of the Securities Act of
1933) that would be in violation of the applicable securities laws; provided,
however, that subject to the restrictions contained in Section 10 of the Warrant
that the disposition of all or any part of such shares shall at all times be
within the undersigned's exclusive control.
Dated: __________________
By:________________________________
(signature of Registered Holder)
Signature Guaranteed:
________________________
By:_____________________
Title:
NOTICE: The signature to this Notice must correspond with the name as
written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Notice must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
16
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant
to Section 7 of the Warrant Certificate accompanying this Notice of Conversion,
that number of shares of Common Stock issuable upon exercise of the Warrant for
an aggregate purchase price of $_______ into that number of shares of Common
Stock of the Company to be received by the undersigned pursuant to the
provisions of Section 7.1 of the accompanying Warrant Certificate.
Dated: _______________ _____________________________
Name of Holder
_____________________________
Signature
Address:
_____________________________
_____________________________
_____________________________
___________________________
Signature Guaranteed:
________________________
By:_____________________
Title:
17
ASSIGNMENT FORM
---------------
(To be executed only upon the
assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the
within Warrant hereby sells, assigns and transfers unto _____________________,
whose address is ________________________, all of the rights of the undersigned
under the within Warrant, with respect to the receipt of shares of Common Stock
of PlayNet Technologies, Inc. and, if such sale, assignment or transfer is for
less than the right to the receipt of all shares of Common Stock to which the
Holder is entitled upon exercise of such Warrant, that a new Warrant of like
tenor for that portion of the Warrant not being transferred hereunder be issued
in the name of and delivered to the undersigned, and does hereby irrevocably
constitute and appoint ______________ Attorney to register such transfer on the
books of the Company maintained for the purpose, with full power of substitution
in the premises.
Dated: _____________, 19__.
By:________________________________
(Signature of Registered Holder)
Signature Guaranteed:
___________________________
By:_______________________
Title:
NOTICE: The signature to this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Assignment must be guaranteed by a
commercial bank or trust company in the United States or a
member firm of the New York Stock Exchange.
18
EXHIBIT 8
FORM OF OPINION OF COUNSEL
Dated: Date of Closing
Name
Address 1
Address 2
Re: Senior Secured Notes
Ladies and Gentlemen:
1. PlayNet is duly organized, validly existing and in good standing
under the laws of the State of its incorporation and has the requisite corporate
power and corporate authority to own, lease and operate its properties and to
carry on its business.
2. PlayNet is duly qualified and in good standing in every state in
which, by reason of the nature or location of PlayNet's assets or operation of
PlayNet's business, such qualification may be necessary and where the failure to
so qualify would have a material adverse affect on (i) the financial condition
of PlayNet, and/or (ii) PlayNet's ability to conduct its business.
3. PlayNet has the requisite corporate power and corporate authority to
execute and deliver, and to perform its obligations under the Agreement dated
December __, 1996 by and between PlayNet and the investors identified therein
and all agreements, documents or instruments executed in connection therewith,
including, but not limited to the [First Stage Notes] [Second Stage Notes] and
the warrants related thereto (the "Agreement"). The execution and delivery of
the Agreement and the performance by PlayNet of its obligations thereunder, has
been duly authorized by all necessary corporate action of PlayNet, and the
Agreement has been duly executed and delivered by an authorized officer of
PlayNet and constitutes the valid and binding obligation of PlayNet enforceable
against PlayNet in accordance with its terms, except to the extent that
enforceability of PlayNet's obligations under the Agreement is subject to and
affected by applicable bankruptcy, insolvency, reorganization, arrangement or
other laws affecting the enforcement of creditors' rights and general principles
of equity (whether enforcement is considered in a proceeding in equity or at
law).
4. The execution, delivery, performance and compliance by PlayNet with
the terms of the Agreement do not violate (i) to the best knowledge of counsel
after due inquiry, any provision of any judgment, writ, decree or order binding
upon PlayNet, the violation of which would have a material adverse effect on
PlayNet, or (ii) any provision of PlayNet's Articles of Incorporation, or
By-Laws. The execution, delivery, performance and compliance by PlayNet with the
terms of the Agreement do not conflict with or constitute a default under the
provisions of any material agreement, document or instrument to which PlayNet is
a party or by which PlayNet is bound and the violation of which would have a
material adverse effect on PlayNet.
5. No action, proceeding or investigation is pending or, to the best of
knowledge of counsel after due inquiry, threatened against PlayNet which
questions the validity of the Agreement, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of PlayNet.
6. To the best knowledge of counsel after due inquiry, PlayNet is not
in violation of any provision of its Articles of Incorporation or Bylaws.
7. The offer, sale and issuance of the [First Stage Notes] [Second
Stage Notes] constitute transactions exempt from registration requirements of
Section 5 of the Securities Act of 1933, as amended.
PlayNet Technologies, Inc.
By: _____________________________
Xxxxxx X. Xxxxxxxx
Secretary and
Director, Legal & Corporate Affairs
================================================================================
Bridge Financing Senior Secured Note Holders - Initial Financing
--------------------------------------------------------------------------------
Name Amount Warrant Ex. Date of Closing
================================================================================
Xxxxx & Company Incorporated $750,000 Exhibit 3 December 30, 1996
--------------------------------------------------------------------------------
Xxxxxx Eblagon Financial Services Ltd. $500,000 Exhibit 4 December 19, 1996
--------------------------------------------------------------------------------
K.F. Chemical Ltd. $250,000 Exhibit 4 December 19, 1996
--------------------------------------------------------------------------------
Ceres Advisors Ltd. $500,000 Exhibit 3 January 30, 1997
--------------------------------------------------------------------------------
Xxxx Xxxx $250,000 Exhibit 3 January 30, 1997
--------------------------------------------------------------------------------
Ceres Advisors Ltd. $250,000 Exhibit 3 February 10, 1997
================================================================================
