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EXHIBIT 10.16
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
Corporation: Witness Systems, Inc., a Delaware corporation
Number of Shares: 20,000
Class of Stock: Series B Preferred
Initial Exercise Price: $4.65 per share
Issue Date: April 22, 1999
Expiration Date: April 22, 2004
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and
for other good and valuable consideration, SILICON VALLEY BANK ("HOLDER") is
entitled to purchase the number of fully paid and nonassessable 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
at any time on or prior to the Expiration Date 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 to Section 1.4.
1.3 Intentionally Omitted
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 Holder advises the Board of Directors in writing that
Holder 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
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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 Holder.
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, on 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, license, 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. Upon the closing of
any Acquisition the successor entity shall assume the obligations of this
Warrant, and 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.
1.7.3. PURCHASE RIGHT. Notwithstanding the
foregoing, at the election of Holder, the Company shall purchase the
unexercised portion of this Warrant for cash upon the closing of any
Acquisition for an amount equal to (a) the fair market value of any
consideration that would have been received by Holder in consideration of the
Shares had Holder exercised the unexercised portion of this Warrant immediately
before the record date for determining the shareholders entitled to participate
in the proceeds of the Acquisition, less (b) the aggregate Warrant Price of the
Shares, but in no event less than zero.
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 Holder would have been
entitled had Holder 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
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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.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price
and the number of Shares issuable upon exercise of this Warrant or, if the
Shares are Preferred Stock, the number of shares of common stock issuable upon
conversion of the Shares, shall be subject to adjustment, from time to time in
the manner set forth on Exhibit A in the event of Diluting Issuances (as
defined on Exhibit A).
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.
If the Company takes any action affecting the Shares or its common stock other
than as described above that adversely affects Holder's rights under this
Warrant, the Warrant Price shall be adjusted downward and the number of Shares
issuable upon exercise of this Warrant shall be adjusted upward in such a
manner that the aggregate Warrant Price of this Warrant is unchanged.
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 ADJUSTMENTS. 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.
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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-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 nonassessable, 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 ninety (90) 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) such other financial statements required under and in accordance with
any loan documents between Holder and the Company (or if there are no such
requirements [or if the subject loan(s) no longer are outstanding]), then
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.
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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 Holder'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 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, as 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 Holder s notice of proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of
Section 4.3 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) at any time to Silicon
Valley Bancshares or The Silicon Valley Bank Foundation , or, to any other
transferree 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.
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.
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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 Georgia, without giving
effect to its principles regarding conflicts of law.
"COMPANY"
WITNESS SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxx
---------------------------------------------
Xxxxx X. Xxxxx, President and Chief
Executive Officer
By: /s/ Xxx X. Xxxxxx
---------------------------------------------
Xxx X. Xxxxxx, Chief Financial Officer and
Secretary
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APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ________ shares of the
Series ______ Preferred Stock of Witness Systems, Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of
such shares in full.
2. 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.]
3. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
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(Name)
-------------------------------------
-------------------------------------
(Address)
4. 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)
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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 _________________________, 20 ___.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact 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:
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EXHIBIT A
ANTI-DILUTION PROVISIONS
In the event of the issuance (a "DILUTING ISSUANCE") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "PROVISIONS") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue
Date, shall be deemed to remain in full force and effect during the term of the
Warrant, unless amended, modified or waived in accordance with Section 4.A.7 of
the Company's Certificate of Incorporation.
Under no circumstances shall the aggregate Warrant Price payable by
the Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
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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):
Registration Rights Agreement dated March 18, 1997 by and
among the Company, Battery Investment Partners IV, LLC, Xxxx
Xxxxxxx and Battery Ventures IV, L.P., as amended by that
certain Amendment No. 1 to the Registration Rights Agreement,
dated September 29, 1998.
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, other than amendments effected in accordance
with the terms of the Agreement that affect the registration rights thereunder
equally as to all parties possessing such registration rights. By acceptance of
the Warrant to which this Exhibit B is attached, Holder shall be deemed to be a
party to the Agreement, unless Holder otherwise elects not to become or to
cease being a party thereto.
WITNESS SYSTEMS, INC.
By: /s/ Xxx X. Xxxxxx
---------------------------------
Name: Xxx X. Xxxxxx
Title: CFO
