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EXHIBIT 10.15
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
MERCURY MAIL, INC.
WARRANT TO PURCHASE SHARES
OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for value received, is entitled to
subscribe for and purchase shares of the fully paid and nonassessable Series B
Preferred Stock, $.01 par Value (as adjusted pursuant to Section 4 hereof, the
"Shares") of Mercury Mail, Inc., a Delaware corporation (the "Company"), at the
price of Three Dollars ($3.00) per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 4
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, (a) the
term "Series Preferred" shall mean the Company's presently authorized Series B
Preferred Stock, and any stock into or for which such Series B Preferred Stock
may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean
March 27, 1977, and (c) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to which
this Warrant was issued, and any warrant issued upon transfer or partial
exercise of this Warrant. The term "Warrant" as used herein shall be deemed to
include Other Warrants unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, in the amounts set forth below at any time and from time
to time from the Date of Grant through the later of (i) ten (10) years after the
Date of Grant or (ii) five (5) years after the closing of the Company's initial
public offering of its Common Stock effected pursuant to a Registration
Statement on Form S-1 (or its successor) filed under the Securities Act of 1933,
as amended (the "Act"): (A) 18,667 shares subject to this Warrant shall be
exercisable upon the Date of Grant and (B) 18,666 shares subject to this Warrant
shall be exercisable on the date on which the conditions precedent set forth in
Section 3.3 of the Loan and Security Agreement of even date herewith (the "Loan
Agreement") are met or waived by Xxxxxxx and the total available Credit Amount,
as defined in the Loan Agreement, equals $2,000,000.
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2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, (a) the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A duly executed) at
the principal office of the Company and by the payment to the Company, by check,
of an amount equal to the then applicable Warrant Price multiplied by the number
of Shares then being purchased, or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Series Preferred
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days after such exercise and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series Preferred
to provide for the exercise of the rights represented by this Warrant and a
sufficient number of shares of its Common Stock to provide for the conversion of
the Series Preferred into Common Stock. Upon conversion of all outstanding
shares of Series Preferred into Common Stock pursuant to the Company's
Certificate of Incorporation, the Warrant shall be exercisable thereafter only
for Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
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(a) Reclassification or Merger. Notwithstanding the term of this
Warrant fixed pursuant to Section 1 hereof, the right to purchase Series
Preferred as granted herein shall expire, if not previously exercised,
immediately upon the closing of a merger or consolidation of the Company with or
into another corporation when the Company is not the surviving corporation
(other than a merger or consolidation for the principal purpose of changing the
domicile of the Company), or the sale of all or substantially all of the
Company's properties and assets to any other person ("the Merger"), provided
that the price per share paid in the Merger is equal to or greater than four (4)
times the Warrant Price per share and further provided that the Company is not
able, after using commercially reasonable efforts, to have the Warrant assured
or substituted.
Subject to the above provisions, in case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the acquiring and
the surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially ail of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance satisfactory to the holder of this Warrant), so that the holder of
this Warrant shall have the right to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Series Preferred theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Series Preferred then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. In addition, in the event that all the authorized shares of
Series Preferred are converted into shares of Common Stock or any other series
or class of capital stock of the Company or in the case of any amendment or
waiver of any of the terms of the antidilution protection of the Series
Preferred, then this Warrant shall be deemed to be amended so that the holder of
this Warrant shall continue to be entitled to antidilution protection as nearly
equivalent as may be practicable to the antidilution protection applicable to
the Series Preferred on the Date of Grant, and the Company shall duly execute
and deliver to the holder of this Warrant a supplement hereto to such effect, in
form and substance satisfactory to the holder of this Warrant. The provisions of
this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers, consolidations, transfers, amendments and waivers.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or
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combine its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in the foregoing subparagraphs (a) and (b)) of Series
Preferred, then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Series Preferred outstanding immediately after
such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Shares of Series Preferred purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying the
number of Shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
the Shares and the Common Stock of the Company are set forth in Section 5 of
Article 4 of the Company's Certificate of Incorporation, as amended through the
Date of Grant (the "Charter"), a true and complete copy of which is attached
hereto as Exhibit B. Such antidilution rights shall not be restated, amended,
modified or waived in any manner that treats the holder hereof in a manner
differently than the other holders of Series Preferred without such holder's
prior written consent. The Company shall promptly provide the holder hereof with
any restatement, amendment, modification or waiver of the Charter promptly after
the same has been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant. In
addition, whenever the conversion price or conversion ratio of the Series
Preferred shall be adjusted, the Company shall
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make a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Series Preferred after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (without
regard to Section 13 hereof, by first class mail, postage prepaid) to the holder
of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares of
Series Preferred.
(a) Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant, and the shares of Series
Preferred to be issued upon exercise hereof and any Common Stock issued upon
conversion thereof are being acquired for investment and that such holder will
not offer, sell or otherwise dispose of this Warrant, or any shares of Series
Preferred to be issued upon exercise hereof or any Common Stock issued upon
conversion thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of this Warrant, unless the Shares being
acquired are registered under the Act or an exemption from such registration is
available, the holder hereof shall confirm in writing, by executing the form
attached as Schedule 1 to Exhibit A hereto, that the shares of Series Preferred
so purchased (and any shares of Common Stock issued upon conversion thereof) are
being acquired for investment and not with a view toward distribution or resale.
This Warrant and all shares of Series Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATIONS ARE NOT
REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE
WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
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(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
for purposes of the Act.
(2) The holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein. In this connection, the holder
understands that, in the view of the SEC, the statutory basis for such exemption
may be unavailable if the holder's representation was predicated solely upon a
present intention to hold the Warrant for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Warrant, or for a period of one year or any
other fixed period in the future.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the holder understands that, except as provided in Section
9 hereof, the Company is under no obligation to register this Warrant.
(4) The holder is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: The availability of certain public information about the
Company, the resale occurring not less than one year after the party has
purchased and paid for the securities to be sold; the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934, as amended) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell
this Warrant there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the holder may be precluded from selling this Warrant under
Rule 144 and 144A even if the one-year minimum holding period had been
satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC
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has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 and 144A will have a substantial burden of proof in establishing that
an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof and each subsequent holder of this Warrant agrees
to give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of such xxxxxx's counsel, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act as then in effect or any federal or state law then in effect) of this
Warrant or such shares of Series Preferred or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Series Preferred to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with such law. Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Series Preferred or Common Stock, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this subsection (b) that the opinion of
counsel for the holder is not reasonably satisfactory to the Company, the
Company shall so notify the holder promptly after such determination has been
made and shall specify in detail the legal analysis supporting any such
conclusion. Notwithstanding the foregoing, this Warrant or such shares of Series
Preferred or Common Stock may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 or 144A under the Act,
provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 or 144A have been satisfied. Each certificate
representing this Warrant or the shares of Series Preferred thus transferred
(except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
(c) Excepted Transfers. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer without any additional consideration of, or grant of a security
interest in, this Warrant or any part hereof (i) to a partner of the holder if
the holder is a partnership, (ii) by the holder to a partnership of which the
holder is a general partner, or (iii) to any affiliate as defined in Rule 405
under the Act of the holder if the holder is a corporation; provided, however,
in any such transfer, the transferee
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shall on the Company's request agree in writing to be bound by the terms of this
Warrant as if an original signatory hereto and further provided that the number
of transfers permitted pursuant to this subparagraph shall be five (5).
8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
shareholders.
9. Registration Rights. The Company covenants and agrees as follows:
9.1 Definitions. For purposes of this Section 9:
(a) The term "Registrable Shares" means (i) the Common
Stock issuable or issued upon conversion of the Series Preferred issuable or
issued upon exercise or conversion of this Warrant or upon exercise or
conversion of the Other Warrants, and (ii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Common Stock or Series
Preferred;
(b) The term "Shareholder" means any person owning or
having the right to acquire Registrable Shares or any assignee thereof in
accordance with Paragraph 9.3 hereof; and
(c) The term "Registration Rights" means the
Stockholders Agreement dated as of July 22, 1996 by and among the Company and
the investors who are signatories thereto (the "Purchase Agreement") (except
Article III), as subsequently amended as of September 19, 1996 and November 27,
1996.
9.2 Grant of Rights. The Company hereby grants to the
Shareholders the rights set forth in the Registration Rights. A true and
complete copy of the Registration Rights is attached hereto as Exhibit C. The
Company represents and warrants to the Shareholders that the Company has
obtained all consents of parties to the Purchase Agreement and of any other
persons that are required in order for the Registrable Shares to be included in
the definition of "Registrable Securities" and for
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the Shareholders to be included in the definition of "Holders," as such terms
are used in the Registration Rights.
9.3 Assignment of Registration Rights. Notwithstanding any provision of
the Registration Rights, the rights to cause the Company to register Registrable
Shares pursuant to the Registration Rights and this Section 9 may be assigned by
a Shareholder to a transferee or assignee of such securities provided the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
9.4 No Conflicting Agreements. The Company represents and warrants to
the Shareholders that the Company is not a party to any agreement that conflicts
in any manner with the Shareholders' rights to cause the Company to register
Registrable Shares pursuant to the Registration Rights and this Section 9. The
Company covenants and agrees that it shall not, without the prior written
consent of the Shareholders holding a majority of the outstanding Registrable
Shares, amend, modify or restate the Registration Rights if the rights of the
Shareholders would be subordinated, diminished or otherwise adversely affected
in a different manner than other "Holders" of "Registrable Securities" (as
defined in the Registration Rights).
9.5 Rights and Obligations Survive Exercise and Expiration of Warrant.
The rights and obligations of the Company, of the holder of this Warrant and of
the Registrable Shares contained in the Registration Rights and this Section 9
shall survive exercise, conversion and expiration of this Warrant.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees that it will not interfere
with the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available. To this end, the
Company will promptly provide the holder of this Warrant with the same notice
(if any) as it provides to other holders of the Company's securities of any
offer to acquire from the Company's security holders more than five percent (5%)
of the total voting power of the Company and will not interfere with the holder
in arranging the sale of this Warrant to the person or persons making such
offer.
10.2 Mergers. The Company will provide the holder of this Warrant with
at least 20 days' notice of the terms and conditions of any proposed (i) sale,
lease, exchange, conveyance or other disposition of all or substantially all of
its property or business, or (ii) merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any other
transaction
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(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of.
10.3 Right to Convert Warrant into Common Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon
exercise of the Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the Company shall
deliver to the holder (without payment by the holder of any exercise price or
any cash or other consideration) (X) that number of shares of fully paid and
nonassessable Series Preferred (or Common Stock if the Series Preferred has been
automatically converted into Common Stock) equal to the quotient obtained by
dividing the value of this Warrant (or the specified portion hereof) on the
Conversion Date (as defined in subsection (b) hereof), which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Converted
Warrant Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate fair market value of the Converted Warrant Shares issuable
upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date (as herein defined) by (Y) the fair market value of one share of
Series Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
-----
Y
Where: X = the number of shares of Series Preferred (or Common Stock) that
may be issued to holder
Y = the fair market value (FMV) of one share of Series Preferred (or
Common Stock)
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
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holder an amount in cash equal to the fair market Value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the Company
together with a notice of exercise substantially in the form attached hereto as
Exhibit A-2, specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date. Any conversion from Series Preferred to Common Stock shall be
in a ratio of one (1) share of Common Stock for each share of Series Preferred
(as adjusted herein and in the Charter). On the Date of Xxxxx, the Series
Preferred purchasable under this Warrant represents underlying shares of Common
Stock at $3.00 per share.
(c) Determination of Fair Market Value. For purposes of this Section
10.3, "fair market value" of a share of Series Preferred (or Common Stock if the
Series Preferred has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering multiplied by the number of shares of
Common Stock into which each share of Series Preferred is then convertible.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the 30-day period ending five business days prior
to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number
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of shares of Common Stock into which each share of Series Preferred is then
convertible;
(B) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing ask prices of the Common Stock over the 30-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the Company's Board
of Directors provided that if the holder does not agree with such reduction,
then at the Company's and the holder's equally shared expense by an investment
banker of national reputation selected by the Company and reasonably acceptable
to the holder of this Warrant.
11. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences and privileges granted to or imposed
upon the Series Preferred and the holders thereof are as set forth in the
Charter, as amended to the Date of the Grant, a true and complete copy of which
has been delivered to the original holder of this Warrant and is attached hereto
as Exhibit B;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Charter, as amended, will be validly issued, fully paid
and nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any
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provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is bound or
require the consent or approval of, the giving of notice to, the registration or
filing with or the taking of any action in respect of or by, any Federal, state
or local government authority or agency or other person, except for the filing
of notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby.
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company, or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities to which the holder
hereof shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will
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make and deliver a new Warrant or stock certificate, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
18. Survival of Representations Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative, provided that the foregoing shall not be interpreted to mean that
such representations are true and correct as of any date other than the date
hereof,
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. Value. The Company and the holder of this Warrant agree that the
value of this Warrant and the Other Warrants on the Date of Grant is $100.00.
21. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
foregoing
22. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, 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
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be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
MERCURY MAIL, INC.
By: /s/
--------------------------------------
Title: CFO
----------------------------------
Address: 000 00xx, Xxxxx 0000
Xxxxxx XX 00000
Date: March 27, 1997
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EXHIBIT A
NOTICE OF EXERCISE
To: Mercury Mail, Inc.
1. The undersigned hereby elects to purchase ____ shares of Series B
Preferred Stock of Mercury Mail, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
------------------------
(Name)
------------------------
------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
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EXHIBIT A-1
NOTICE OF EXERCISE
To: Mercury Mail, Inc. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-__, filed _________, 199 __ the undersigned hereby elects to
purchase ________ shares of Series B Preferred Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $____________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
(Signature)
(Date)
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EXHIBIT A-2
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: Mercury Mail, Inc.
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 10.3 of the Warrant) as provided herein. ___________ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 10.3(a) of the
Warrant, which requires the use of the "fair market value" of the Company's
stock. As of the Determination Date (as defined in the Warrant), the "fair
market value" of one share of Series Preferred Stock (or Common Stock if the
Series B Preferred Stock has been automatically converted into Common Stock)
shall be determined in the manner provided in Section 10.3(c) of the Warrant,
which amount has been determined by the undersigned (or agreed to by the holder
of the Warrant and Mercury Mail, Inc.) to be $__________ per share. Therefore,
_________ shares are to be issued to the undersigned pursuant to this exercise.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-----------------------
(Name)
-----------------------
-----------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
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