THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Warrant to Purchase 20,000 Shares
of the Common Stock of Paradigm Technology, Inc.
Issue Date: June 30, 1997
Expiration Date: June 30, 2002
Initial Exercise Price: $3.00 per share
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, GREYROCK BUSINESS CREDIT, a division of
NationsCredit Commercial Corporation ("Holder") is entitled to purchase the
number of fully paid and non-assessable shares of the class of securities (the
"Shares") of the corporation (the "Company") at the initial exercise price per
Share (the "Warrant Price") all as set forth above and as adjusted pursuant to
Article 2 of this Warrant, subject to the provisions and upon the terms and
conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Xxxxxx advises
the Board of Directors in writing that Xxxxxx disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Xxxxxx.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of this Warrant, the Company
at its expense shall execute and deliver, in lieu of this Warrant, a new warrant
of like tenor.
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition" means
any sale or other disposition of all or substantially all of the assets of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
1.7.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
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1.7.3. NONASSUMPTION. If upon the closing of any Acquisition the successor
entity does not assume the obligations of this Warrant and Holder has not
otherwise exercised this Warrant in full, then the unexercised portion of this
Warrant shall be deemed to have been automatically converted pursuant to Section
1.2 and thereafter Holder shall participate in the acquisition on the same terms
as other holders of the same class of securities of the Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Xxxxxx would have been entitled had Xxxxxx owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENT. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant
is not greater than (i) the price per share at which the Shares were last issued
in an arms-
-2-
length transaction in which at least $500,000 of the Shares were sold and (ii)
the fair market value of the Shares as of the date of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or any
of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within one hundred five (105) days after the
end of each fiscal year of the Company, the annual audited financial statements
of the Company certified by independent public accountants of recognized
standing and (c) within forty-five (45) days after the end of each of the first
three quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 TERM; NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Xxxxxx's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
-3-
4.5 NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
4.9 REPRESENTATIONS AND WARRANTIES. This Warrant has been entered into by
the Company in reliance upon the following representations and covenants of the
Holder:
(a) Investment Purpose. Holder's rights to acquire this Warrant or the
------------------
Common Stock issuable upon conversion of the Warrant are acquired for investment
and not with a view to the sale or distribution of any part thereof, and the
Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.
(b) Private Issue. The Holder understands (i) that this Warrant and the
-------------
Common Stock issuable upon conversion of this Warrant is/are not registered
under the Securities Act of 1933, as amended (the "1933 Act") or qualified under
applicable state securities laws, and (ii) that the Company is relying on an
exemption from registration predicated on the representations set forth in this
Section 4. The Holder understands that the Warrant will bear a legend
restricting its transfer and that a notation restricting such transfer will be
made on the transfer books of the Company.
(c) Financial Risk. The Holder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(d) Accredited Investor. The Holder represents to the Company that such
-------------------
Holder is an "Accredited Investor" as defined in Regulation D promulgated under
the 1933 Act.
(e) Risk of No Registration. The Holder understands that if the Company
-----------------------
does not register the Common Stock issuable upon exercise of this Warrant with
the Securities and Exchange Commission, or if a registration statement covering
the securities under the 1933 Act is not in effect when it desires to sell the
Common Stock issuable upon conversion of the Warrant it may be required to hold
such securities for an indefinite period. The Holder agrees that the Holder will
not sell or otherwise dispose of the Warrant in violation of the provisions of
the 1933 Act. The Holder also understands that any sale of the Warrant or the
Common Stock which might be made by it in reliance upon Rule 144 under the 1933
Act may be made only in accordance with the terms and conditions of that Rule.
PARADIGM TECHNOLOGY, INC.
By /s/ Xxxxxxx Xxxxxx
------------------------------------
Chairman of the Board, President
or Vice President
By /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Secretary or Assistant Secretary
-4-
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ________ shares of the
Common/Series __ [strike one] Stock of ______________ pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ______ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
---------------------
(Name)
---------------------
---------------------
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
---------------------------------------
(Signature)
---------------------------------------
(Date)
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
----------, ----
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear __________:
This is to advise you that the Warrant issued to you described below
will expire on __________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contract person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
[Name of Issuer]
By
------------------------------
Its
-----------------------------
-5-
EXHIBIT A
---------
[Reserved.]
EXHIBIT B
REGISTRATION RIGHTS
The Shares (if common stock), or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
INVESTORS RIGHTS AGREEMENT dated April 28, 1995, as amended.
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration rights thereunder
without the consent of Holder. By acceptance of the Warrant to which this
Exhibit B is attached, Holder shall be deemed to be a party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter
into Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
-6-
