EXHIBIT 10.20
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
WARRANT TO PURCHASE SERIES C PREFERRED STOCK
of
XXXXXXX.XXX, INC.
Void after July __, 2004
This Warrant is issued to PETCO Animal Services, Inc. ("Petco"), or
its registered assigns ("Holder") by Xxxxxxx.xxx, Inc., a Delaware corporation
(the "Company"), on July 12, 1999 (the "Warrant Issue Date"). This Warrant is
issued pursuant to the terms of that certain Series C Preferred Stock Purchase
Agreement dated as of the date hereof (the "Purchase Agreement") in connection
with the Company's issuance to the Holder of 7,820,633 shares of Series C
Preferred Stock.
1. Purchase Shares. Subject to the terms and conditions hereinafter set forth
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and set forth in the Purchase Agreement, the Holder is entitled, upon surrender
of this Warrant at the principal office of the Company (or at such other place
as the Company shall notify the holder hereof in writing), to purchase from the
Company [_____________________] (__________) fully paid and nonassessable shares
of Series C Preferred Stock of the Company, as constituted on the Warrant Issue
Date (the "Preferred Stock"). The number of shares of Preferred Stock issuable
pursuant to this Section 1 (the "Shares") shall be subject to adjustment
pursuant to Section 8 hereof.
2. Exercise Price. The purchase price for the Shares shall be equal to
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[$___], as adjusted from time to time pursuant to Section 8 hereof (the
"Exercise Price").
3. Exercise Period. This Warrant shall be exercisable, in whole or in part,
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commencing upon the earlier to occur of: (a) the closing of the Company's
initial public offering pursuant to a registration statement filed with the
Securities Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "IPO"); and (b) the date upon which the Company sells any shares of
its preferred stock to a third party at a purchase price per share equal to or
greater than the Exercise Price. The Warrant shall terminate and no longer be
exercisable upon the earlier to
occur of (x) 5:00 p.m. on July __, 2004 and (y) a sale of all or substantially
all of the assets of the Company or the merger or consolidation of the Company
with or into any other corporation or entity, other than a wholly-owned
subsidiary of the Company, as a result of which the stockholders of the Company
immediately prior to such transaction hold less than fifty percent (50%) of the
voting power of the surviving corporation.
4. Method of Exercise. While this Warrant remains outstanding and exercisable
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in accordance with Section 3 above, the Holder may exercise, in whole or in
part, the purchase rights evidenced hereby. Such exercise shall be effected by:
(a) the surrender of the Warrant, together with a duly executed copy of the
form of Notice of Exercise attached hereto, to the Secretary of the Company at
its principal offices; and
(b) the payment to the Company of an amount equal to the aggregate Exercise
Price for the number of Shares being purchased.
5. Net Exercise. In lieu of exercising this Warrant pursuant to Section 4,
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the Holder may elect to receive, without the payment by the Holder of any
additional consideration, shares of Preferred Stock equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with the Notice of Exercise, in
which event the Company shall issue to the holder hereof a number of shares of
Preferred Stock computed using the following formula:
Y (A - B)
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X = A
Where: X = The number of shares of Preferred Stock to be issued to the
Holder pursuant to this net exercise;
Y = The number of Shares in respect of which the net issue
election is made;
A = The fair market value of one share of the Preferred Stock at
the time the net issue election is made;
B = The Exercise Price (as adjusted to the date of the net
issuance).
For purposes of this Section 5, the fair market value of one share of Preferred
Stock (or, to the extent all such Preferred Stock has been converted into the
Company's Common Stock) as of a particular date shall be determined as follows:
(i) if traded on a securities exchange or through the Nasdaq National Market,
the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the thirty (30) day period ending three (3)
days prior to the net exercise election; (ii) if traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the net exercise; and (iii) if there is no active public market, the
value shall be the fair market value thereof, as determined in good faith by the
Board of Directors of the
Company; provided, that, if the Warrant is being exercised upon the closing of
the Company's first underwritten public offering of common stock (the "IPO"),
the value will be the initial "Price to Public" of one share of such Preferred
Stock (or Common Stock issuable upon conversion of such Preferred Stock)
specified in the final prospectus with respect to such offering.
6. Certificates for Shares. Upon the exercise of the purchase rights
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evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, if applicable), and in any event within thirty (30) days of
the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Shares, when issued
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pursuant to the exercise of this Warrant, will be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens, and charges with respect
to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of and kind
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of securities purchasable upon exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
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shall at any time prior to the expiration of this Warrant subdivide its
Preferred Stock, by split or otherwise, or combine its Preferred Stock, or
issue additional shares of its Preferred Stock or Common Stock as a
dividend with respect to any shares of its Preferred Stock, the number of
Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend,
or proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the Exercise Price, but the aggregate
Exercise Price for the total number of Shares purchasable under this
Warrant (as adjusted) shall remain the same. Any adjustment under this
Section 8(a) shall become effective at the close of business on the date
the subdivision or combination becomes effective, or as of the record date
of such dividend, or in the event that no record date is fixed, upon the
making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of any
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reclassification, capital reorganization, or change in the Preferred Stock
of the Company (other than as a result of a subdivision, combination, or
stock dividend provided for in Section 8(a) above), then, as a condition of
such reclassification, reorganization, or change, lawful provision shall be
made, and duly executed documents evidencing the same from the Company or
its successor shall be delivered to the Holder, so that the Holder shall
have the right at any time prior to the expiration of this Warrant to
purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of
Preferred Stock as were purchasable by the Holder immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the
Holder so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the
Exercise Price hereunder, provided the aggregate Exercise Price shall
remain the same.
9. No Fractional Shares or Scrip. No fractional shares or scrip representing
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fractional shares shall be issued upon the exercise of this Warrant, but in lieu
of such fractional shares the Company shall make a cash payment therefor on the
basis of the Exercise Price then in effect.
10. No Stockholder Rights. Prior to exercise of this Warrant, the Holder shall
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not be entitled to any rights of a stockholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
nothing in this Section 10 shall limit the right of the Holder to be provided
the Notices required under this Warrant or the Purchase Agreement.
11. Transfers of Warrant. Subject to compliance with applicable federal and
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state securities laws, this Warrant and all rights hereunder are transferable in
whole or in part by the Holder to any person or entity upon written notice to
the Company. The transfer shall be recorded on the books of the Company upon
the surrender of this Warrant, properly endorsed, to the Company at its
principal offices, and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer. In the event of a partial
transfer, the Company shall issue to the holders one or more appropriate new
warrants.
12. Successors and Assigns. The terms and provisions of this Warrant and the
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Purchase Agreement shall inure to the benefit of, and be binding upon, the
Company and the Holders hereof and their respective successors and assigns.
13. Amendments and Waivers. Any term of this Warrant may be amended and the
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observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of a majority of shares of Preferred
Stock issued or issuable upon exercise of Warrants issued pursuant to the
Purchase Agreement. Any waiver or amendment effected in accordance with this
Section shall be binding upon each holder of any Shares purchased under this
Warrant at the time outstanding (including securities into which such Shares
have been converted), each future holder of all such Shares, and the Company.
14. Effect of Amendment or Waiver. The Holder acknowledges that by the
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operation of Section 13 hereof, the holders of a majority of shares of Preferred
Stock issued or issuable upon exercise of Warrants issued pursuant to the
Purchase Agreement will have the right and power to diminish or eliminate all
rights of such holder under this Warrant or under the Purchase Agreement.
15. Notices. All notices required under this Warrant shall be deemed to have
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been given or made for all purposes (i) upon personal delivery, (ii) upon
confirmation receipt that the
communication was successfully sent to the applicable number if sent by
facsimile; (iii) one day after being sent, when sent by professional overnight
courier service, or (iv) five days after posting when sent by registered or
certified mail. Notices to the Company shall be sent to the principal office of
the Company (or at such other place as the Company shall notify the Holder
hereof in writing). Notices to the Holder shall be sent to the address of the
Holder on the books of the Company (or at such other place as the Holder shall
notify the Company hereof in writing).
16. Attorneys' Fees. If any action of law or equity is necessary to enforce or
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interpret the terms of this Warrant, the prevailing party shall be entitled to
its reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which it may be entitled.
17. Captions. The section and subsection headings of this Warrant are inserted
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for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
18. Governing Law. This Warrant shall be governed by the laws of the State of
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California as applied to agreements among California residents made and to be
performed entirely within the State of California.
IN WITNESS WHEREOF, Xxxxxxx.xxx, Inc. caused this Warrant to be
executed by an officer thereunto duly authorized.
XXXXXXX.XXX, INC.
By:__________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
