CAPE COASTAL TRADING CORPORATION FORM OF WARRANT
Exhibit
4.1
NEITHER
THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR
OTHER LOAN SECURED BY SUCH SECURITIES.
CAPE
COASTAL TRADING CORPORATION
FORM
OF
WARRANT
| Warrant No.: DEC005-0XX |
Dated:
December 30, 2005
|
Cape
Coastal Trading Corporation, a Delaware corporation (the “Company”),
hereby
certifies that, for value received, ____________________ or its registered
assigns (the “Holder”),
is
entitled to purchase from the Company up to a total of _________ (X,XXX) shares
of common stock, $0.001 par value per share (the “Common
Stock”),
of the
Company (each such share, a “Warrant
Share”
and
all
such shares issuable under the warrants, the “Warrant
Shares”)
at an
exercise price equal to $5.85 per share (as adjusted from time to time as
provided in Section 9, the “Exercise
Price”),
at any
time and from the date hereof and through and including the date that is five
(5) years from the date of issuance hereof (the “Expiration
Date”),
and
subject to the following terms and conditions. This Warrant (“Warrant”)
is one
of a series of similar warrants issued pursuant to that certain Securities
Purchase Agreement, dated as of December 22, 2005, by and among the Company,
uBid, Inc. and the Investors identified therein (the “Purchase
Agreement”).
All
such warrants are referred to herein, collectively, as the “Warrants”
and
the
holders thereof along with the Holder named herein, the “Holders.”
1. Definitions.
In
addition to the terms defined elsewhere in this Warrant, capitalized terms
that
are not otherwise defined herein have the meanings given to such terms in the
Purchase Agreement.
2. Registration
of Warrant.
The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant
Register”),
in the
name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for
the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
1
3. Registration
of Transfers.
The
Company shall register the transfer of any portion of this Warrant in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to the Transfer Agent or to the
Company at its address specified herein. Upon any such registration or transfer,
a new warrant to purchase Common Stock, in substantially the form of this
Warrant (any such new warrant, a “New
Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.
4. Exercise
and Duration of Warrants.
(a) This
Warrant shall be exercisable by the registered Holder at any time and from
time
to time on or after the date hereof to and including the Expiration Date. At
6:30 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value;
provided that, if the average of the Closing Prices for the five Trading Days
immediately prior to (but not including) the Expiration Date exceeds the
Exercise Price on the Expiration Date, provided further that, if on the
Expiration Date, there is no effective Registration Statement covering the
resale of the Warrant Shares, or no current prospectus available, then this
Warrant shall be deemed to have been exercised in full (to the extent not
previously exercised) on a “cashless exercise” basis at 6:30 P.M. New York City
time on the Expiration Date. A “cashless exercise” means that in lieu of paying
the aggregate purchase price for the shares being purchased upon exercise of
the
Warrants in cash, the Holder will forfeit a number of shares underlying the
Warrants pursuant to Section
10
below.
(b) A
Holder
may exercise this Warrant by delivering to the Company (i) an exercise notice,
in the form attached hereto (the “Exercise
Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a “cashless exercise” if so indicated in the
Exercise Notice only if a “cashless exercise” may occur at such time pursuant to
Section 10 below), and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an “Exercise
Date.”
The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice shall
have
the same effect as cancellation of the original Warrant and issuance of a New
Warrant evidencing the right to purchase the remaining number of Warrant
Shares.
(c) Exercise
Disputes.
In the
case of any dispute with respect to the number of shares to be issued upon
exercise of this Warrant, the Company shall promptly issue such number of shares
of Common Stock that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the Holder via facsimile within
two
(2) Business Days of receipt of the Holder's election to purchase Warrant
Shares. If the Holder and the Company are unable to agree as to the
determination of the Purchase Price within two (2) Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall in accordance with this Section, submit via facsimile
the
disputed determination to an independent reputable accounting firm of national
standing, selected jointly by the Company and the Holder. The Company shall
cause such accounting firm to perform the determinations or calculations and
notify the Company and the Holder of the results within forty-eight (48) hours
from the time it receives the disputed determinations of calculations. Such
accounting firm's determination shall be binding upon all parties absent
manifest error. The Company shall then on the next Business Day issue
certificate(s) representing the appropriate number of Warrant Shares of Common
Stock in accordance with such accounting firm's determination and this Section.
The prevailing party shall be entitled to reimbursement of all fees and expenses
of such determination and calculation.
2
5. Delivery
of Warrant Shares.
(a) Upon
exercise of this Warrant, the Company shall promptly (but in no event later
than
three Trading Days after the Exercise Date) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends unless a registration
statement covering the resale of the Warrant Shares and naming the Holder as
a
selling stockholder thereunder is not then effective and the Warrant Shares
are
not freely transferable without volume restrictions pursuant to Rule 144 under
the Securities Act. The Holder, or any Person so designated by the Holder to
receive Warrant Shares, shall be deemed to have become holder of record of
such
Warrant Shares as of the Exercise Date. The Company shall, upon request of
the
Holder, use its best efforts to deliver Warrant Shares hereunder electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions.
(b) This
Warrant is exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue or cause to
be
issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.
(c) In
addition to any other rights available to a Holder, if the Company fails to
deliver to the Holder a certificate representing Warrant Shares by the third
Trading Day after the date on which delivery of such certificate is required
by
this Warrant, and if after such third Trading Day the Holder purchases (in
an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a “Buy-In”),
then
the Company shall, within three Trading Days after the Holder’s request and in
the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In
Price”),
at
which point the Company’s obligation to deliver such certificate (and to issue
such Common Stock) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Common
Stock and pay cash to the Holder in an amount equal to the excess (if any)
of
the Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Price on the date of the event giving rise to the
Company’s obligation to deliver such certificate.
(d) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or
any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation
of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to
the
Holder in connection with the issuance of Warrant Shares. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock upon exercise
of
the Warrant as required pursuant to the terms hereof.
3
6. Charges,
Taxes and Expenses.
Issuance
and delivery of certificates for shares of Common Stock upon exercise of this
Warrant shall be made without charge to the Holder for any issue or transfer
tax, withholding tax, transfer agent fee or other incidental tax or expense
in
respect of the issuance of such certificates, all of which taxes and expenses
shall be paid by the Company; provided, however, that the Company shall not
be
required to pay any tax which may be payable in respect of any transfer involved
in the registration of any certificates for Warrant Shares or Warrants in a
name
other than that of the Holder. The Holder shall be responsible for all other
tax
liability that may arise as a result of holding or transferring this Warrant
or
receiving Warrant Shares upon exercise hereof.
7. Replacement
of Warrant.
If this
Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Warrant, a New Warrant, but
only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable bond or indemnity, if
requested. Applicants for a New Warrant under such circumstances shall also
comply with such other reasonable regulations and procedures and pay such other
reasonable third-party costs as the Company may prescribe.
8. Reservation
of Warrant Shares.
The
Company covenants that it will at all times reserve and keep available out
of
the aggregate of its authorized but unissued and otherwise unreserved Common
Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, 130% of the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other contingent purchase rights
of
persons other than the Holder (after giving effect to the adjustments and
restrictions of Section
9,
if any).
The Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid
and
nonassessable. The Company will take all such action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any
securities exchange or automated quotation system upon which the Common Stock
may be listed.
9. Certain
Adjustments.
The
Exercise Price and number of Warrant Shares issuable upon exercise of this
Warrant are subject to adjustment from time to time as set forth in this
Section
9.
4
(a) Stock
Dividends and Splits.
If the
Company, at any time while this Warrant is outstanding, (i) pays a stock
dividend on its Common Stock or otherwise makes a distribution on any class
of
capital stock that is payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, or (iii)
combines outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction
of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution, and any adjustment pursuant to clause
(ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination.
(b) Distributions
Made Prior to Exercise.
If the
Company, at any time while this Warrant is outstanding, distributes to holders
of Common Stock (i) evidences of its indebtedness, (ii) any security (other
than
a distribution of Common Stock covered by Section 9(a)), (iii) rights or
warrants to subscribe for or purchase any security, or (iv) any other asset
(in
each case, a “Distribution”),
then
in each such case any Exercise Price in effect immediately prior to the close
of
business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution shall be reduced, effective as of
the
close of business on such record date, to a price determined by multiplying
such
Exercise Price by a fraction of which (i) the numerator shall be the Weighted
Average Price1
of the
Common Stock on the Trading Day immediately preceding such record date minus
the
value of the Distribution (as determined in good faith by the Company's Board
of
Directors) applicable to one share of Common Stock, and (ii) the denominator
shall be the Weighted Average Price of the Common Stock on the Trading Day
immediately preceding such record date.
(c) Notwithstanding
the provisions set forth in Section
9(b)
above, if
the Company, at any time while this Warrant is outstanding, makes a Distribution
to the holders of Common Stock, then in each such case the Holder shall have
the
option to receive such Distribution which would have been made to the Holder
had
such Holder been the holder of such Warrant Shares on the record date for the
determination of stockholders entitled to such Distribution; provided,
however,
if the
Holder elects to receive such Distribution, it will not be entitled to receive
the adjustment to the Exercise Price specified in clause (b) above.
1“Weighted
Average Price" means, for any security as of any date, the dollar
volume-weighted average price for such security on NASDAQ during the period
beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New
York
Time (or such other time as NASDAQ publicly announces is the official close
of
trading) as reported by Bloomberg (means Bloomberg Financial Markets) through
its "Volume at Price" functions, or, if the foregoing does not apply, the
dollar
volume-weighted average price of such security in the over-the-counter market
on
the electronic bulletin board for such security during the period beginning
at
9:30:01 a.m., New York Time (or such other time as such Principal Market
publicly announces is the official open of trading), and ending at 4:00:00
p.m.,
New York Time (or such other time as such market publicly announces is the
official close of trading) as reported by Bloomberg, if no dollar
volume-weighted average price is reported for such security by Bloomberg
for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the
"pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company in good faith. All such determinations shall be appropriately adjusted
for any share dividend, share split, share combination or other similar
transaction during the applicable calculation period.
5
(d) Fundamental
Transactions.
(1) If,
at any time while this Warrant is outstanding, (i) the Company effects any
merger or consolidation of the Company with or into (whether or not the Company
is the surviving corporation) another Person, (ii) the Company effects any
sale,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions; provided, however,
that for avoidance of doubt, the granting of a lien on all or substantially
all
of the Company's assets as collateral shall not be deemed a Fundamental
Transaction hereunder, (iii) allow another Person to make a purchase, tender
or
exchange offer that is accepted by the holders of more than the 50% of either
the outstanding shares of Common Stock (not including any shares of Common
Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
(iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off
or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Common Stock (not including
any
shares of Common Stock held by the other Person or other Persons making or
party
to, or associated or affiliated with the other Persons making or party to,
such
stock purchase agreement or other business combination), or (v) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (other than as a result of
a
subdivision or combination of shares of Common Stock covered by Section
9(a)
above)
(in any such case, a “Fundamental
Transaction”),
then
the Holder shall have the right thereafter to receive, upon exercise of this
Warrant, the same amount and kind of securities, cash or property as it would
have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full
of this Warrant (the “Alternate
Consideration”).
The
aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration.
If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall
be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. At the Holder’s
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (d) and insuring that the Warrant (or any
such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.
(2) Notwithstanding
the foregoing and the provisions of Section 4(b) above, in the event of a
Fundamental Transaction in which (i) the surviving entity in the Fundamental
Transaction is not a publicly traded company and (ii) the consideration to
be
delivered to the holders of Common Stock upon the occurrence of such Fundamental
Transaction does not consist solely of publicly traded securities, if the Holder
has not exercised the Warrant in full prior to the consummation of such
Fundamental Transaction, then
the Holder shall have the right to require any successor to the Company or
surviving entity in such Fundamental Transaction to purchase this Warrant from
the Holder by paying to the Holder, simultaneously with the consummation of
such
Fundamental Transaction and
in lieu
of the warrant referred to in Section 9(d)(1), cash in an amount equal to the
value of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black and Scholes
Option Pricing Model reflecting (i) a risk-free interest rate corresponding
to
the U.S. Treasury rate for a period equal to the remaining term of this Warrant
as of such date of request and (ii) an expected volatility equal to the lesser
of 60% and the 100 day volatility obtained from the HVT function on
Bloomberg.
6
(e) Adjustment
Upon Issuance of Shares of Common Stock.
If and
whenever on or after the issuance date of this Warrant through the first
(1st)
anniversary thereof, the Company issues or sells, or in accordance with this
Section 9 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by
or
for the account of the Company) for a consideration per share (the "New
Issuance Price")
less
than a price (the "Applicable
Price")
equal
to the Exercise Price in effect immediately prior to such issue or sale or
deemed issuance or sale (the foregoing a "Dilutive
Issuance"),
then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the New Issuance Price.
If
and
whenever after such first (1st)
anniversary, the Company issues or sells, or in accordance with this Section
9
is deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company) in a Dilutive Issuance, then immediately after such Dilutive
Issuance, the Exercise Price then in effect shall be reduced to an amount equal
to the product
of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance
and (B) the quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Exercise Price in effect immediately prior to such
Dilutive Issuance and the number of shares of Common Stock Deemed Outstanding
immediately prior to such Dilutive Issuance plus (II) the consideration, if
any,
received by the Company upon such Dilutive Issuance, by (2) the product derived
by multiplying (I) the Exercise Price in effect immediately prior to such
Dilutive Issuance by (II) the number of shares of Common Stock Deemed
Outstanding immediately after such Dilutive Issuance. Upon
each
such adjustment of the Exercise Price hereunder, the number of Warrant Shares
shall be adjusted to the number of shares of Common Stock determined by
multiplying the Exercise Price in effect immediately prior to such adjustment
by
the number of Warrant Shares acquirable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. For purposes of determining
the
adjusted Exercise Price under this Section 9(e), the following shall be
applicable:
(i) Issuance
of Options.
If the
Company in any manner grants any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option
or upon conversion, exercise or exchange of any Convertible Securities issuable
upon exercise of any such Option is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the granting or sale of such Option
for
such price per share. For purposes of this Section 9(e)(i), the "lowest price
per share for which one share of Common Stock is issuable upon exercise of
such
Options or upon conversion, exercise or exchange of such Convertible Securities"
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of Common
Stock upon the granting or sale of the Option, upon exercise of the Option
and
upon conversion, exercise or exchange of any Convertible Security issuable
upon
exercise of such Option. No further adjustment of the Exercise Price or number
of Warrant Shares shall be made upon the actual issuance of such shares of
Common Stock or of such Convertible Securities upon the exercise of such Options
or upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.
7
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable Price,
then
such share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 9(e)(ii), the "lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange" shall be equal
to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the issuance
or
sale of the Convertible Security and upon conversion, exercise or exchange
of
such Convertible Security. No further adjustment of the Exercise Price or number
of Warrant Shares shall be made upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is
made
upon exercise of any Options for which adjustment of this Warrant has been
or is
to be made pursuant to other provisions of this Section 9(e), no further
adjustment of the Exercise Price or number of Warrant Shares shall be made
by
reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into
or exercisable or exchangeable for shares of Common Stock increases or decreases
at any time, the Exercise Price and the number of Warrant Shares in effect
at
the time of such increase or decrease shall be adjusted to the Exercise Price
and the number of Warrant Shares which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially granted, issued
or
sold. For purposes of this Section 9(e)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the date of issuance of this
Warrant are increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the shares
of
Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall
be deemed to have been issued as of the date of such increase or decrease.
No
adjustment pursuant to this Section 9(e) shall be made if such adjustment would
result in an increase of the Exercise Price then in effect or a decrease in
the
number of Warrant Shares.
8
(iv) Calculation
of Consideration Received.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $0.01. If any shares
of Common Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, the consideration received therefor will
be deemed to be the net amount received by the Company therefor. If any shares
of Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of such consideration received by
the
Company will be the fair value of such consideration, except where such
consideration consists of securities which are listed on a securities exchange
or stock market, in which case the amount of consideration received by the
Company will be the Closing Sale Price of such security on the date of receipt.
If any shares of Common Stock, Options or Convertible Securities are issued
to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business
of
the non-surviving entity as is attributable to such shares of Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Board of Directors of the Company and the Required Holders. If such parties
are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within five (5) Business Days after the tenth
day following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such
appraiser shall be final and binding upon all parties absent manifest error
and
the fees and expenses of such appraiser shall be borne by the
Company.
(v) Record
Date.
If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable
in shares of Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue
or
sale of the shares of Common Stock deemed to have been issued or sold upon
the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case
may
be.
9
(vi) Notwithstanding
the foregoing, no adjustment will be made under this Section
9(e)
upon the
issuance of equity securities or securities convertible into equity securities
(a) in connection with employee benefit plans or other plans approved by the
Board of Directors for the benefit of employees, consultants or directors of
the
Company or its subsidiaries, (b) stock dividends or other events to which
Section
9(a)
applies,
or in connection with Options or Convertible Securities outstanding immediately
prior to the Closing; provided that the terms of such Options or Convertible
Securities are not amended, modified or changed after the date hereof, (c)
issued or assumed in connection with the Merger Agreement or the Securities
Purchase Agreement, (d) in connection with a bona fide acquisition by the
Company or to strategic partners in a transaction the primary purpose of which
is not to raise equity funds, or (e) pursuant to a firm commitment underwritten
public offering with a nationally recognized underwriter which generates gross
proceeds in excess of $50 million (other than an "at the market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines").
(vii) For
purposes of this Warrant, (A) "Common
Stock Deemed Outstanding"
means,
at any given time, the number of shares of Common Stock actually outstanding
at
such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 9(e)(i) and 9(e)(ii) hereof regardless of whether the
Options or Convertible Securities are actually exercisable at such time, but
excluding any shares of Common Stock owned or held by or for the account of
the
Company or issuable upon conversion and exercise, as applicable, of the
Warrants; (B) "Convertible
Securities"
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock; and (C)
"Options"
means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.
(f) Number
of Warrant Shares.
Simultaneously with any adjustment to the Exercise Price pursuant to paragraph
(a) of this Section, the number of Warrant Shares that may be purchased upon
exercise of this Warrant shall be increased or decreased proportionately, as
applicable, so that after such adjustment the aggregate Exercise Price payable
hereunder for the increased or decreased, as applicable, number of Warrant
Shares shall be the same as the aggregate Exercise Price in effect immediately
prior to such adjustment.
(g) Calculations.
All
calculations under this Section
9
shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable.
The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common
Stock.
(h) Notice
of Adjustments.
Upon the
occurrence of each adjustment pursuant to this Section
9,
the
Company at its expense will promptly compute such adjustment in accordance
with
the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise
of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is based.
Upon written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the Company’s Transfer Agent.
10
(i) Notice
of Corporate Events.
If the
Company (i) declares a dividend or any other distribution of cash, securities
or
other property in respect of its Common Stock, including without limitation
any
granting of rights or warrants to subscribe for or purchase any capital stock
of
the Company or any Subsidiary, (ii) authorizes or approves, enters into any
agreement contemplating or solicits stockholder approval for any Fundamental
Transaction or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to
the
Holder a notice describing the material terms and conditions of such
transaction, at least ten calendar days prior to the applicable record or
effective date on which a Person would need to hold Common Stock in order to
participate in or vote with respect to such transaction, and the Company will
take all steps reasonably necessary in order to insure that the Holder is given
the practical opportunity to exercise this Warrant prior to such time so as
to
participate in or vote with respect to such transaction; provided, however,
that
the failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such notice.
10. Payment
of Exercise Price.
The
Holder shall pay the Exercise Price in immediately available funds (a “cash
exercise”); provided, however, that if at any time after the date that is one
(1) year after the date of this Warrant (the “Required
Effective Date”)
a
Registration Statement covering the resale of the Warrant Shares is not
effective on the Exercise Date, or no current prospectus is available, the
Holder may satisfy its obligation to pay the Exercise Price through a “cashless
exercise,” in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:
|
X
=
Y [(A-B)/A]
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where:
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X
=
the number of Warrant Shares to be issued to the
Holder.
|
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Y
=
the number of Warrant Shares with respect to which this Warrant is
being
exercised (prior to cashless exercise).
|
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A
=
the average of the Closing Prices for the five Trading Days immediately
prior to (but not including) the Exercise Date.
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B
=
the Exercise Price.
|
For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced,
on
the date this Warrant was originally issued pursuant to the Purchase
Agreement.
11
11. Limitation
on Exercise.
(a) Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares
of
Common Stock then beneficially owned by such Holder and its Affiliates and
any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not
exceed 9.999% (the “Maximum
Percentage”)
of the
total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
The Company’s obligation to issue shares of Common Stock in excess of the
limitation referred to in this Section shall be suspended (and shall not
terminate or expire notwithstanding any contrary provisions hereof) until such
time, if any, as such shares of Common Stock may be issued in compliance with
such limitation, but in no event later than the Expiration Date. By written
notice to the Company, the Holder may waive the provisions of this Section
or
increase or decrease the Maximum Percentage to any other percentage specified
in
such notice, but (i) any such waiver or increase will not be effective until
the
61st day after such notice is delivered to the Company, and (ii) any such waiver
or increase or decrease will apply only to the Holder and not to any other
holder of Warrants.
12. Fractional
Shares.
The
Company shall not be required to issue or cause to be issued fractional Warrant
Shares on the exercise of this Warrant. If any fraction of a Warrant Share
would, except for the provisions of this Section, be issuable upon exercise
of
this Warrant, the number of Warrant Shares to be issued will be rounded up
to
the nearest whole share.
13. Notices.
Any and
all notices or other communications or deliveries hereunder (including without
limitation any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice
or
communication is delivered via facsimile at the facsimile number specified
in
the Purchase Agreement prior to 6:30 p.m. (New York City time) on a Trading
Day,
(ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified
in
the Purchase Agreement on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (iii) the Trading Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to
be
given. The address for such notices or communications shall be as set forth
in
the Purchase Agreement.
14. Warrant
Agent.
The
Company shall serve as warrant agent under this Warrant. Upon 30 days' notice
to
the Holder, the Company may appoint a new warrant agent. Any corporation into
which the Company or any new warrant agent may be merged or any corporation
resulting from any consolidation to which the Company or any new warrant agent
shall be a party or any corporation to which the Company or any new warrant
agent transfers substantially all of its corporate trust or stockholders
services business shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly cause notice
of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
12
15. Registration
of Warrant Shares.
The
Company shall prepare and file with the SEC a “Shelf” Registration Statement on
Form S-3 covering the resale of all “Registrable Securities” (as that term is
defined under the Purchase Agreement) for an offering pursuant to the Securities
Act of 1933, as amended, in accordance with the terms of the Purchase
Agreement.
16. Miscellaneous.
(a) Subject
to
the restrictions on transfer set forth on the first page hereof, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by the Company,
except to a successor in the event of a Fundamental Transaction. This Warrant
shall be binding on and inure to the benefit of the parties hereto and their
respective successors and assigns. Subject to the preceding sentence, nothing
in
this Warrant shall be construed to give to any Person other than the Company
and
the Holder any legal or equitable right, remedy or cause of action under this
Warrant.
(b) The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other voluntary action, seek to call or redeem this
Warrant or avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may
be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any Warrant Shares above
the
amount payable therefor on such exercise, (ii) will take all such action as
may
be reasonably necessary or appropriate in order that the Company may validly
and
legally issue fully paid and nonassessable Warrant Shares, free from all taxes,
liens, security interests, encumbrances, preemptive or similar rights and
charges of stockholders (other than those imposed by the Investors), on the
exercise of the Warrant, and (iii) will not close its stockholder books or
records in any manner which interferes with the timely exercise of this
Warrant.
(c) Remedies;
Specific Performance.
The
Company acknowledges and agrees that there would be no adequate remedy at law
to
the Holder of this Warrant in the event of any default or threatened default
by
the Company in the performance of or compliance with any of the terms of this
Warrant and accordingly, the Company agrees that, in addition to any other
remedy to which the Holder may be entitled at law or in equity, the Holder
shall
be entitled to seek to compel specific performance of the obligations of the
Company under this Warrant, without the posting of any bond, in accordance
with
the terms and conditions of this Warrant in any court of the United States
or
any State thereof having jurisdiction, and if any action should be brought
in
equity to enforce any of the provisions of this Warrant, the Company shall
not
raise the defense that there is an adequate remedy at law. Except as otherwise
provided by law, a delay or omission by the Holder hereof in exercising any
right or remedy accruing upon any such breach shall not impair the right or
remedy or constitute a waiver of or acquiescence in any such breach. No remedy
shall be exclusive of any other remedy. All available remedies shall be
cumulative.
13
(d) Amendments
and Waivers.
The
Company may, without the consent of the Holders, by supplemental agreement
or
otherwise, (i) make any changes or corrections in this Agreement that are
required to cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein or (ii)
add to the covenants and agreements of the Company for the benefit of the
Holders (including, without limitation, reduce the Exercise Price or extend
the
Expiration Date), or surrender any rights or power reserved to or conferred
upon
the Company in this Agreement; provided that, in the case of (i) or (ii), such
changes or corrections shall not adversely affect the interests of Holders
of
then outstanding Warrants in any material respect. This Warrant may also be
amended or waived with the consent of the Company and the Holder. Further,
the
Company may, with the consent, in writing or at a meeting, of the Holders (the
"Required
Holders")
of the
then outstanding Warrants exercisable for two-thirds (2/3) or greater of the
Common Stock eligible under such Warrants, amend in any way, by supplemental
agreement or otherwise, this Warrant and/or all of the outstanding Warrants;
provided, however, that (i) no such amendment by its express terms shall
adversely affect any Holder differently than it affects all other Holders,
unless such Holder consents thereto, and (ii) no such amendment concerning
the
number of Warrant Shares or Exercise Price shall be made unless any Holder
who
will be affected by such amendment consents thereto. If a new Warrant Agent
is
appointed by the Company, it shall at the request of the Company, and without
need of independent inquiry as to whether such supplemental agreement is
permitted by the terms of this Section
16(d),
join
with the Company in the execution and delivery of any such supplemental
agreements, but shall not be required to join in such execution and delivery
for
such supplemental agreement to become effective.
(e) GOVERNING
LAW; VENUE; WAIVER OF JURY TRIAL.
THE
CORPORATE LAWS OF THE STATE OF NEW YORK SHALL GOVERN ALL ISSUES CONCERNING
THE
RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT
TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT
BY
THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY
THE
COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
14
(f) The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(g) In
case
any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER
OF XXXX INTENTIONALLY LEFT BLANK,
SIGNATURE
PAGE FOLLOWS]
15
IN
WITNESS
WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.
|
CAPE
COASTAL TRADING CORPORATION
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| By: | ||
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| Name: | ||
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| Title: | ||
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||
FORM
OF
EXERCISE NOTICE
(To
be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)
To:
[COMPANY NAME]
The
undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by Cape
Coastal Trading Corporation, a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
|
(a)
|
The
Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.
|
(b) The
undersigned Holder hereby exercises its right to purchase _________________
Warrant Shares pursuant to the Warrant.
(c) The
Holder
intends that payment of the Exercise Price shall be made as (check
one):
____ “Cash
Exercise” under Section 10
____ “Cashless
Exercise” under Section 10
(d) If
the
holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the
Warrant.
(e) Pursuant
to this exercise, the Company shall deliver to the holder _______________
Warrant Shares in accordance with the terms of the Warrant.
(f) Following
this exercise, the Warrant shall be exercisable to purchase a total of
______________ Warrant Shares.
(g) Notwithstanding
anything to the contrary contained herein, this Exercise Notice shall constitute
a representation by the Holder that, after giving effect to the exercise
provided for in this Exercise Notice, the Holder (together with its affiliates)
will not have beneficial ownership (together with the beneficial ownership
of
such Person's affiliates) of a number of shares of Common Stock which exceeds
the Maximum Percentage of the total outstanding shares of Common Stock as
determined pursuant to the provisions of Section 11(a) of the
Warrant.
| Dated: ________________________, _________ |
Name
of Holder:
|
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| (Print) | |||
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By:
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Name:
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Title:
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(Signature
must conform in all respects to name
of
holder as specified on the face of the
Warrant)
|
FORM
OF
ASSIGNMENT
[To
be
completed and signed only upon transfer of Warrant]
FOR
VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant
to
purchase ____________ shares of Common Stock of Cape Coastal Trading Corporation
to which the within Warrant relates and appoints ________________ attorney
to
transfer said right on the books of Cape Coastal Trading Corporation with full
power of substitution in the premises.
| Dated: ________________________, _________ |
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(Signature
must conform in all respects to name of holder
as
specified on the face of the Warrant)
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Address
of Transferee
|
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In
the presence of:
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