EXHIBIT 6.5
WARRANT AGREEMENT
WARRANT AGREEMENT dated April 19, 1995 between DIGITAL DESCRIPTOR
SYSTEMS, INC., a Delaware corporation (the "Company"), and the holders of
warrants listed on Schedule A (together with any successors and assigns, the
"Warrantholders").
The Company proposes to issue to the Warrantholders up to 75,000
Redeemable Class A Warrants (the "Class A-l "Warrants") and 75,000 Redeemable
Class B Warrants (the "Class X-x Warrants" which together with the Class A-l
Warrants are collectively referred to as the "Warrants") each Warrant evidences
the right to purchase one share of Common Stock, $.001 par value per share, of
the Company (the "Common Stock") or an aggregate for all Warrants of up to
150,000 authorized but previously unissued shares of Common Stock of the
Company.
NOW THEREFORE, it is agreed as follows:
ARTICLE I
ISSUANCE, FORM AND EXECUTION OF WARRANT CERTIFICATES
Section 1.1 Warrant Certificates.
The Company shall execute and deliver to the Warrantholders
certificates which the Company has authorized to represent the Warrants
("Warrant Certificates"). The Warrant Certificates shall be substantially as set
forth in Exhibit A and Exhibit B hereto and may have such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Warrant
Agreement or to conform to usage. The Warrant Certificates shall be dated with
the date of their issuance.
Section 1.2 Execution of Warrant Certificates.
The Warrant Certificates shall be executed on behalf of the Company by
a duly authorized officer of the Company.
ARTICLE 2
EXERCISE OF WARRANTS
Section 2.1 Exercise.
Any or all of the Class A-1 Warrants represented by each Warrant
Certificate may be exercised by the Warrantholder thereof at any time after 9:00
a.m., Pennsylvania time, April 14, 1996 and before 5:00 p.m., Pennsylvania time,
April 13, 2000, (the "Exercise Period") unless extended by the Company. Any or
all of the Class B-1 Warrants represented by each Warrant
Certificate may be exercised by the Warrantholder thereof at any time after 9:00
a.m., Pennsylvania time, April 14, 1996 and before 5:00 p.m., Pennsylvania time,
April 14, 2000, (the "Exercise Period") unless extended by the Company. The
Warrants may be exercised by surrender of the Warrants Certificate with the
Purchase Form, attached hereto (or a reasonable facsimile thereof) duly executed
by such holder, to the Company at its principal office in Langhorne,
Pennsylvania accompanied by payment, in cash or by certified or official bank
check to the order of the Company, in an amount equal to the product of the
number of shares of Common Stock issuable upon exercise of the Warrant
represented by such Warrant Certificate, as adjusted pursuant to the provisions
of Article 3 hereof, multiplied by the Exercise Price, as defined below, and
such holder shall be entitled to receive such number of fully paid and
nonassessable shares of Common Stock, as so adjusted, at the time of such
exercise.
Section 2.2 Exercise Price.
(a) The exercise price for each Class A-1 Warrant shall be an
amount equal to the exercise price of a Redeemable Class A Warrant of the
Company which will be a component of the Units to be offered by the Company in
a public offering underwritten by Xxxxxx, Xxxxxxx Inc. (the "Units"). The Units
shall consist of one share of Common Stock $.001 par value, one Redeemable Class
A Warrant, and one Redeemable Class B Warrant. If the Units or Redeemable Class
A Warrants are not offered by the Company on or before April 13, 1996, the
exercise price of the Class A-l Warrants shall be $6.25. In any event the
exercise price of the Class A-l Warrants shall be as adjusted pursuant to the
provisions of Article 3 hereof (such price as so adjusted from time to time
being herein called the "Class A-l Warrants Exercise Price").
(b) The exercise price for each Class X-x Warrant shall be an
amount equal to the exercise price of a Redeemable Class B Warrant of the
Company which will be a component of the Units. If the Units or Redeemable Class
B Warrants are not offered by the Company on or before April 13, 1996, the
exercise price of the Class X-x Warrants shall be $7.50. In any event the
exercise price of the Class X-x Warrants shall be as adjusted pursuant to the
provisions of Article 3 hereof (such price as so adjusted from time to time
being herein called the "Class X-x Warrant Exercise Price").
Section 2.3 Time of Exercise.
Each exercise of Warrants shall be deemed to have been effective
immediately prior to the close of business on the business day on which the
Warrant Certificate relating to such Warrants shall have been surrendered to the
Company as provided in Section 2.1. At such time the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such exercise as provided in Section 2.4 shall be deemed to
have become the holder or holders of record thereof.
Section 2.4 Issuance of Shares of Common Stock: No Fractional Shares.
As soon as practicable after the exercise of any Warrant, and in any
event within three
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(3) business days after receipt by the Company of the notice of exercise under
Section 2.1, the Company, at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the holder thereof or as such holder may direct (upon payment by such holder of
any applicable transfer taxes).
(a) a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such holder shall be entitled
upon such exercise plus, in lieu of any fractional share to which such
holder would otherwise be entitled, an amount in cash equal to such
fraction multiplied by the then current value of a share of Common Stock,
such current value to be determined as follows:
(i) if the Common Stock shall be listed or admitted to unlisted
trading privileges on any single national securities exchange, then
such current value shall be computed on the basis of the last reported
sale price of the Common Stock on such exchange on the last business
day prior to the date of the exercise of such Warrant upon which a sale
shall have been effected; or
(ii) if the Common Stock shall not be so listed or admitted to
unlisted trading privileges and bid and asked prices therefor in the
over-the-counter market shall be reported by NASDAQ, including the
National Marketing System, then such current value shall be the last
reported sale on the last business day prior to the date of the
exercise of such Warrant, or, in the event the last reported sale is
unavailable, the average of the closing bid and asked prices on the
last business day prior to the date of the exercise of such Warrant as
so reported; or
(iii) if the Common Stock shall be listed or admitted to
unlisted trading privileges on more than one national securities
exchange or one or more national securities exchanges and in the
over-the-counter market, then such current value shall, if different as
a result of calculation under the applicable method(s) described above
in this Section, be deemed to be the higher number calculated in
connection therewith; or
(iv) if the Common Stock shall not be so listed or admitted to
unlisted trading privileges and such bid and asked prices shall not be
so reported, then such current value shall be computed on the basis of
the book value of Common Stock as of the close of business on the last
day of the month immediately preceding the date upon which such Warrant
was exercised, as determined by the Company.
and
(b) in case such exercise includes only part of the Warrants
represented by a Warrant Certificate, a new Warrant Certificate or Warrant
Certificates of like tenor, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment therein) to the number of such shares
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called for on the face of such Warrant Certificate minus the number of
such shares designated by the holder for such exercise as provided in
Section 2.1. Warrants, represented by a properly assigned Warrant
Certificate, may be exercised by a new holder without first having a new
Warrant Certificate issued.
The certificates issued to evidence shares of Common Stock or new Warrant
Certificate may bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND ANY TRANSFER,
SALE OR OTHER DISPOSITION MAY BE MADE ONLY IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF APPLICABLE FEDERAL OR STATE SECURITIES LAWS
OR PURSUANT TO AN EXEMPTION FROM THE PROVISIONS THEREOF. THE SECURITIES
REPRESENTED HEREBY ARE SUBJECT TO THE TERMS OF A WARRANT AGREEMENT
DATED APRIL 14, 1995, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY.
THESE SECURITIES WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE
WITH SUCH LAWS.
ARTICLE 3
ANTIDILUTION PROVISIONS
Section 3.1 Adjustment of Exercise Price.
(a) The Class A-l Warrant Exercise Price and Class X-x Warrant Exercise
Price shall each be subject to the following adjustments. In the event
that:
(i) any dividends on any class of stock of the Company payable in
Common Stock or securities convertible into Common Stock shall be paid
by the Company;
(ii) the Company shall split or subdivide its then outstanding
shares of Common Stock into a greater number of shares; or
(iii) the Company shall combine outstanding shares of Common
Stock, by reclassification or otherwise;
then in any such event, each Exercise Price in effect immediately prior to
such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full
cent) determined by dividing (A) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the such
existing Exercise Price, by (B) the total number of shares of Common Stock
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outstanding immediately after such event (including the maximum number
of shares of Common Stock issuable in respect of any securities convertible
into common stock), and the resulting quotient shall be the adjusted
Exercise Price per share.
(b) No adjustment of the Class A-l Warrant Exercise Price or Class X-x
Warrant Exercise Price shall be made if the amount of such adjustments
shall be less than $.01 per share, but in such case any adjustment that
would otherwise be required then to be made shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any adjustment adjustments so carried forward, shall
amount to not less than $.01 per share.
Section 3.2 Adjustment of Number of Shares Purchasable on Exercise
of Warrants.
Upon each adjustment of the Exercise Price pursuant to Section 3.1, the
registered holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares specified in such Warrant (as adjusted as a result of all adjustments
in the Exercise Price in effect prior to such adjustment) by the Exercise Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
Section 3.3 Notice as to Adjustment.
Upon any adjustment of the Class A-l Warrant Exercise Price and Class
X-x Warrant Exercise Price and an increase or decrease in the number of shares
of Common Stock purchasable upon the exercise of the Warrants, then, and in
each such case, the Company shall within ten (10) days after the effective date
of such adjustment give written notice thereof, by first class mail, postage
prepaid, addressed to each registered Warrantholder at the address of such
Warrantholder as shown on the books of the Company, which notice shall state the
adjusted Exercise Price and the increased or decreased number of shares
purchasable upon the exercise of the Warrants, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
Section 3.4 Effect of Reorganization, Reclassification, Merger, Etc.
If at any time while any Warrant is outstanding there should be any
capital reorganization or reclassification of the capital stock of the Company
(other than a split, subdivision or combination of outstanding shares of
Common Stock by reclassification or otherwise as provided for in Section 3.1
hereof) or any consolidation or merger of the Company with or into another
corporation or any sale, conveyance, lease or other transfer by the Company of
all or substantially all of its assets to any other corporation, the holder of
any Warrant shall, during the remainder of the period such Warrant is
exercisable, be entitled to receive, upon payment of the Exercise Price for such
Warrant, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such consolidation,
merger, sale,
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conveyance, lease or transfer, that a holder of Common Stock deliverable upon
the exercise of such Warrant, would been entitled to receive in such
reorganization, reclassification, consolidation, merger, sale, conveyance, lease
or transfer, if such Warrant had been exericised immediately prior to such
reorganization, reclassification, consolidation, merger, sale, conveyance, lease
or transfer. Appropriate adjustment (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Warrant Agreement with respect to the rights and interests thereafter of
the Warrantholders to the end that the provisions set forth in this Warrant
Agreement (including the adjustment of the Exercise Price for such Warrant and
the number of shares issuable upon the exercise of the Warrants) shall
thereafter be applicable, as near as may be reasonably practicable, in relation
to any shares or other property thereafter deliverable upon the exercise of the
Warrants as if the Warrants had been exercised immediately prior to such
reorganization, reclassification, consolidation, merger, sale, conveyance, lease
or transfer. The Company shall not effect any such reorganization,
reclassification, consolidation, merger, sale, conveyance, lease or transfer
unless, upon or prior to the consummation thereof, the successor corporation or
the corporation to which the property of the Company has been sold, conveyed,
leased or transferred shall assume by written instrument the obligation to
deliver to the holder of each Warrant such shares of stock, securities, cash or
property as in accordance with the foregoing provisions such holder shall be
entitled to purchase.
Section 3.5 Prior Notice as to Certain Events.
In the event,
(a) The Company shall pay any dividend upon its Common Stock
payable in stock or make any distribution (other than cash dividends)
to the holders of its Common Stock; or
(b) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or any other rights; or
(c) There shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale, conveyance, lease, or other transfer of all or
sustantially all of its assets to, another corporation; or
(d) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then in any one or more of such cases, the Company shall give prior written
notice, by first class mail, postage prepaid, addressed to each registered
Warrantholder at the address of such Warrantholder as shown on the books of the
Company, of the date on which (i) the books of the Company shall close or a
record shall be taken for such stock dividend, distribution or subscription
rights, or (ii) such reorganiztion, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
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be. Such notice shall also specify the xxxx as of which the holders of the
Common Stock of record shall participate in such dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up, as the case may be. Such written notice shall be given at least
twenty (20) days prior to the action in question and not less than twenty (20)
days prior to the record date or the date on which the Company's transfer books
are closed in respect thereto.
Section 3.6 Certain Obligations of the Company.
The Company will not, by amendment of its articles of incorporation or
through any 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 of this Warrant
Agreement or the Warrant Certificate, but will at all times in good faith
assist in the carrying out of all such terms. Without limiting the generality of
the foregoing, the Company (a) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of such stock upon the exercise of all Warrants from
time to time outstanding and (b) will not (i) transfer all or substantially all
of its properties and assets to any other person or entity, or (ii) consolidate
or merge into any other entity where the Company is not the continuing or
surviving entity, or (iii) permit any other entity to consolidate with or merge
inn) the Company where the Company is the continuing or surviving entity but, in
connection with such consolidation or merger, the Common Stock then issuable
upon the exercise of the Warrants shall be changed into or exchanged for shares
or other securities or property of any other entity unless, in any such case,
the other entity acquiring such properties and assets, continuing or surviving
after such consolidation or merger or issuing or distributing such shares or
other securities or property as the case may be, shall expressly assume in
writing and be bound by all terms of this Warrant Agreement and the Warrant
Certificates.
Section 3.7 Reservation of Common Stock.
The Company will at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares of Common
Stock from time to time issuable upon such exercise. All such shares shall be
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable with no liability on the part of the holder thereto.
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