EXHIBIT 5.3
WARRANT ANTIDILUTION AGREEMENT
THIS WARRANT ANTIDILUTION AGREEMENT (the "Agreement") is entered into as of
June 15, 2001, by and among Valesc Inc., a corporation duly organized and
existing under the laws of the State of Delaware (the "Company") and Xxxxxx
Private Equity, LLC (hereinafter referred to as "Xxxxxx").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Equity Line") of up to Twenty
Million Dollars ($20,000,000), excluding any funds paid upon exercise of the
Warrants, of Common Stock of the Company pursuant to that certain Investment
Agreement (the "Investment Agreement") between the Company and Xxxxxx dated on
or about June 15, 2001, the Company has agreed to sell and Xxxxxx has agreed to
purchase, from time to time as provided in the Investment Agreement, shares of
the Company's Common Stock for a maximum aggregate offering amount of Twenty
Million Dollars ($20,000,000); and
WHEREAS, pursuant to the terms of the Investment Agreement, the Company has
agreed, among other things, to issue to Xxxxxx Commitment Warrants, as defined
in the Investment Agreement, to purchase a number of shares of Common Stock,
exercisable for five (5) years from their respective dates of issuance.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ISSUANCE OF COMMITMENT WARRANTS. As compensation for entering into the
Equity Line, Xxxxxx received a warrant convertible into 780,000 shares of the
Company's Common Stock, in the form attached hereto as EXHIBIT A (the
"Commitment Warrants").
2. ISSUANCE OF ADDITIONAL WARRANTS. On each six month anniversary of the
date of issuance of the Commitment Warrants (each, a "Six Month Anniversary
Date") continuing throughout the term of the Commitment Warrant, the Company
shall issue to the Investor additional warrants (the "Additional Warrants"), to
purchase a number of shares of Common Stock, if necessary, such that the sum of
the number of Commitment Warrants and the number of Additional Warrants issued
to Investor shall equal at least "Y%" of the number of fully diluted shares of
Common Stock of the Company on such Six Month Anniversary Date (not including
any shares issued or issuable to Xxxxxx), where "Y" shall equal 6.5% for the
first Six Month Anniversary Date, and shall be reduced by 0.5% for each Six
Month Anniversary Date beginning on and following the second Six Month
Anniversary Date. The Additional Warrants shall be in the form of
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EXHIBIT A hereto, and shall initially be exercisable at the same price as the
Commitment Warrants (as most recently reset), shall have the same reset
provisions as the Commitment Warrants (which resets shall occur on each six
month anniversary of the date of issuance of the applicable Additional Warrant
throughout the term of the applicable Additional Warrant), shall have piggyback
registration rights and shall have a 5-year term.
3. OPINION OF COUNSEL. Concurrently with the issuance and delivery of the
Commitment Opinion (as defined in the Investment Agreement) to the Investor, or
on the date that is six (6) months after the date of this Agreement, whichever
is sooner, the Company shall deliver to the Investor an Opinion of Counsel
(signed by the Company's independent counsel) covering the issuance of the
Commitment Warrants and the Additional Warrants, and the issuance and resale of
the Common Stock issuable upon exercise of the Warrants and the Additional
Warrants.
4. CHANGE IN CORPORATE ENTITY. The Company shall not, at any time after the
date hereof, enter into any merger, consolidation or corporate reorganization of
the Company with or into, or transfer all or substantially all of the assets of
the Company to, another entity unless the resulting successor or acquiring
entity in such transaction, if not the Company (the "Surviving Entity"), (i) has
Common Stock listed for trading on Nasdaq or on another national stock exchange
and is a Reporting Issuer, (ii) assumes by written instrument the Company's
obligations with respect to this Warrant Antidilution Agreement and the
Additional Warrants, including but not limited to the obligations to deliver to
the Investor shares of Common Stock and/or securities that Investor is entitled
to receive pursuant to this Investment Agreement and upon exercise of the
Additional Warrants and agrees by written instrument to reissue, in the name of
the Surviving Entity, any Additional Warrants (each in the same terms, including
but not limited to the same reset provisions, as the Commitment Warrants
originally issued or required to be issued by the Company) that are outstanding
immediately prior to such transaction, making appropriate proportional
adjustments to the number of shares represented by such Warrants and the
exercise prices of such Warrants to accurately reflect the exchange represented
by the transaction.
5. TERMINATION OF INVESTMENT AGREEMENT. Notwithstanding any Termination or
Automatic Termination (as each is defined in the Investment Agreement) of the
Investment Agreement, this Agreement, including but not limited to the Company's
obligation to issue Additional Warrants, shall remain in full force and effect
throughout the term of the Commitment Warrants, and may not be terminated.
6. ARBITRATION; GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia applicable to
agreements made in and wholly to be performed in that jurisdiction, except for
matters arising under the Act or the Securities Exchange Act of 1934, which
matters shall be construed and interpreted in accordance with such laws. Any
controversy or claim arising out of or related to the Transaction Documents or
the breach thereof, shall be settled by binding arbitration in Atlanta, Georgia
in accordance with the Expedited Procedures (Rules 53-57)
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of the Commercial Arbitration Rules of the American Arbitration Association
("AAA"). A proceeding shall be commenced upon written demand by Company or any
Investor to the other. The arbitrator(s) shall enter a judgment by default
against any party, which fails or refuses to appear in any properly noticed
arbitration proceeding. The proceeding shall be conducted by one (1) arbitrator,
unless the amount alleged to be in dispute exceeds two hundred fifty thousand
dollars ($250,000), in which case three (3) arbitrators shall preside. The
arbitrator(s) will be chosen by the parties from a list provided by the AAA, and
if they are unable to agree within ten (10) days, the AAA shall select the
arbitrator(s). The arbitrators must be experts in securities law and financial
transactions. The arbitrators shall assess costs and expenses of the
arbitration, including all attorneys' and experts' fees, as the arbitrators
believe is appropriate in light of the merits of the parties' respective
positions in the issues in dispute. Each party submits irrevocably to the
jurisdiction of any state court sitting in Atlanta, Georgia or to the United
States District Court sitting in Georgia for purposes of enforcement of any
discovery order, judgment or award in connection with such arbitration. The
award of the arbitrator(s) shall be final and binding upon the parties and may
be enforced in any court having jurisdiction. The arbitration shall be held in
such place as set by the arbitrator(s) in accordance with Rule 55.
Although the parties, as expressed above, agree that all claims, including
claims that are equitable in nature, for example specific performance, shall
initially be prosecuted in the binding arbitration procedure outlined above, if
the arbitration panel dismisses or otherwise fails to entertain any or all of
the equitable claims asserted by reason of the fact that it lacks jurisdiction,
power and/or authority to consider such claims and/or direct the remedy
requested, then, in only that event, will the parties have the right to initiate
litigation respecting such equitable claims or remedies. The forum for such
equitable relief shall be in either a state or federal court sitting in Atlanta,
Georgia. Each party waives any right to a trial by jury, assuming such right
exists in an equitable proceeding, and irrevocably submits to the jurisdiction
of said Georgia court. Georgia law shall govern both the proceeding as well as
the interpretation and construction of this Agreement and the transaction as a
whole.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of this
15TH day of June, 2001.
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VALESC INC. SUBSCRIBER:
XXXXXX PRIVATE EQUITY, LLC.
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx, Vice President Xxxx X. Xxxxxx, Manager
00 Xxxxxxxxx Xxxx Xxxx 000 Xxxxxxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000 Suite 300
Telephone: (000) 000-0000 Xxxxxxx, XX 00000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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