Exhibit 10.28
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
VIISAGE TECHNOLOGY, INC.
WARRANT
Warrant No. AW-1 Dated: March 10, 2000
Viisage Technology, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Strong River Investments, Inc. or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company the total number of shares of common stock,
$.001 par value per share (the "Common Stock"), of the Company (each such share,
a "Warrant Share" and all such shares, the "Warrant Shares") calculated pursuant
to Section 3 of this Warrant (subject to adjustment for certain events as set
forth herein) at an exercise price equal to $.001 per share (as adjusted from
time to time as provided in Section 8, the "Exercise Price"), at the times set
forth herein through and including the 25th Business Day (as defined in Exhibit
A) following the Third Vesting Date (as defined herein) (the "Expiration Date"),
and subject to the following terms and conditions (certain terms used herein are
defined in Exhibit A attached hereto):
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers. The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Transfer Agent or to the Company at the address specified in Section 13.
Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if
any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance of such
transferee of all of the rights and obligations of a holder of a Warrant.
3. Duration, Vesting and Exercise.
(a) The vesting of the Warrant Shares which the Holder is permitted to
acquire pursuant to this Warrant shall occur on the dates set forth below. On
each such date, this Warrant shall vest on a cumulative basis with respect to a
number of Warrant Shares calculated pursuant to Section 3(b) below. Only the
Warrant Shares that have vested may be acquired upon exercise of this Warrant.
(i) The first vesting date (the "First Vesting Date") shall be the
120th day following the Closing Date (as defined in Exhibit A), provided,
that, at the Holder's option, the First Vesting Date may be delayed up to
December 31, 2000;
(ii) The second vesting date (the "Second Vesting Date") shall be the
25th Trading Day following the First Vesting Date; and
(iii) The third vesting date (the "Third Vesting Date") shall be the
25th Trading Day following the Second Vesting Date.
Each of the First Vesting Date, Second Vesting Date, and Third Vesting Date
shall be referred to herein as a "Vesting Date."
(b) On each Vesting Date and during the twenty four Trading Days following
such Vesting Date, this Warrant shall vest and become exercisable with respect
to the number of Warrant Shares calculated in accordance with the following
formula:
(Applicable Share Number) x [(Purchase Price/0. 92) - (Adjustment Price)]
Adjustment Price
If the number calculated in accordance with the foregoing formula is zero
or a negative number, no Warrant Shares shall vest hereunder for such Vesting
Date and the Holder shall not be obligated to transfer any shares of Common
Stock to the Company. In addition, the Holder shall not be obligated to transfer
any shares of Common Stock to the Company and the number Warrant Shares
exercisable hereunder which shall have previously vested will not decrease.
(c) Notwithstanding anything herein to the contrary, if, after the
Effective Date, the average of the Per Share Market Values (as defined in
Exhibit A) for 20 consecutive Trading Days is greater than 140% of the Purchase
Price (as defined in Exhibit A) (which number shall be subject to equitable
adjustment for stock splits, recombinations and similar events), this Warrant
shall not vest with respect to any additional Warrant Shares but will remain in
effect as to any Warrant Shares which have vested prior thereto.
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(d) Notwithstanding anything herein to the contrary, if on any Vesting Date
the Adjustment Price shall be less than 70% of the Purchase Price (the "Floor
Price"), then on such Vesting Date: (i) this Warrant shall vest with respect to
the Warrant Shares pursuant to Section 3(a) and (b) hereof, provided, that the
Adjustment Price pursuant to the formula set forth in Section 3(b) shall,
exclusively for purposes of this Section 3(d)(i), equal the Floor Price (such
number of Warrant Shares, the "Initial Shares") and (ii) with respect to the
Warrant Shares whose vesting would result in a vesting of Warrant Shares in
excess of the Initial Shares, the Company will have the option to elect by
written notice (the "Notice") delivered to the Holder no later than twenty (20)
Trading Days prior to the applicable Vesting Date to either (x) pay to the
Holder, in cash (the "Cash Payment"), within three (3) Trading Days from the
Vesting Date at issue, an amount equal to the product obtained by multiplying
(A) the applicable Adjustment Price and (B) the difference between the number of
Warrant Shares which would have otherwise vested on such Vesting Date pursuant
to Section 3(a) and (b) hereof and the Initial Shares (such number of Warrant
Shares, the "Subsequent Shares") or (y) allow this Warrant to vest with respect
to the Subsequent Shares. A failure by the Company to deliver the Notice to the
Holder pursuant to the terms of this Section shall constitute an election by the
Company to allow this Warrant to vest as to the Subsequent Shares pursuant to
the terms hereof. If the Company shall fail to pay the Cash Payment in full to
the Holder by the third (3rd) Trading Day from the Vesting Date at issue, then,
at the election of the Holder, the Company shall either (x) pay to the Holder
$5,000 per day until the Cash Payment and all additional payments due hereunder
are paid in full, or (y) allow this Warrant to vest with respect to the
Subsequent Shares.
(e) Notwithstanding the foregoing provisions of this Section 3, at any time
during the period between the Closing Date and the Expiration Date, within ten
(10) Trading Days following the occurrence of any of the following events (each,
an "Event"), the Holder shall have the option to elect, by providing the Company
with a notice (an "Event Vesting Notice"), to have this Warrant vest with
respect to those Warrant Shares that have not yet already vested:
(i) upon the occurrence of any of (i) an acquisition after the date
hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of in excess of 1/3 of the voting securities
of the Company, (ii) a replacement of more than one-half of the members of
the Company's board of directors which is not approved by those individuals
who are members of the board of directors on the date hereof in one or a
series of related transactions, (iii) the merger of the Company with or
into another entity, consolidation or sale of all or substantially all of
the assets of the Company in one or a series of related transactions,
unless following such transaction or series of transactions, the holders of
the Company's securities prior to the first such transaction continue to
hold at least 2/3 of the securities of the surviving entity or acquirer of
such assets or (iv) the execution by the Company of an agreement to which
the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii) or (iii);
(ii) immediately prior to an assignment by the Company for the benefit
of creditors or commencement of a voluntary case under Title 11 of the
United States Code, or an entering into of an order for relief in an
involuntary case under Title 11 of the United States Code, or adoption by
the Company of a plan of liquidation or dissolution;
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(iii) five (5) Business Days prior to the proposed consummation with
respect to the Company of a "Rule 13e-3 transaction" as defined in Rule
13e-3 under the Exchange Act (or, if necessary, such earlier date as the
Company shall determine in good faith to be required in order for the
Holder to be able to participate in such transaction), it being agreed that
the Holder will receive actual notice of the 13e-3 Statement filed with the
Commission;
(iv) For any period of three consecutive (3) Trading Days commencing
on or after the date of issuance of this Warrant, there shall be no closing
bid price on the Common Stock on the Nasdaq (as defined in Exhibit A) or a
Subsequent Market (as defined in Exhibit A);
(v) The Common Stock fails to be listed or quoted for trading on the
Nasdaq or a Subsequent Market or for a period of three consecutive (3)
Trading Days;
(vi) After the Effective Date, a holder of Registrable Securities (as
defined in the Registration Rights Agreement) is unable or not permitted to
sell Registrable Securities under the Underlying Shares Registration
Statement (as defined in Exhibit A) for any reason for five (5) or more
days (whether or not consecutive); or
(vii) The Company shall fail or default in the timely performance of
any material obligation under the Transaction Documents and such failure or
default shall continue uncured for a period of five (5) Business Days after
the date on which notice of such failure or default is first given to the
Company.
In the event the Holder delivers an Event Vesting Notice, this Warrant
shall vest with respect to the number of Warrant Shares calculated in accordance
with the formula set forth in Section 3(b), provided, that for purposes of such
calculation, (A) the Adjustment Price shall be deemed to mean the average of the
Per Share Market Values for any 10 Trading Days (which need not be consecutive)
during the 25 consecutive Trading Days preceding the date of the Event, as
selected by the Holder and (B) the Applicable Share Number shall be deemed to
mean 100% of the number of shares of Common Stock purchased by the Holder
pursuant to the Purchase Agreement.
(f) Subject to Sections 3(a) and (b), this Warrant shall be exercisable by
the registered Holder on any Business Day before 6:30 P.M., New York City time,
at any time and from time to time on or after the date hereof to and including
the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date,
the portion of this Warrant not exercised prior thereto shall be and become void
and of no value.
(g) Subject to Sections 3(a) and (b), this Warrant shall be exercisable,
either in its entirety or, from time to time, for a portion of the number of
Warrant Shares. If less than all of the Warrant Shares which may be purchased
under this Warrant are exercised at any time, the Company shall issue or cause
to be issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares for which no exercise has been evidenced by
this Warrant.
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4. Delivery of Warrant Shares.
(a) Upon surrender of this Warrant, with the Form of Election to Purchase
attached hereto duly completed and signed, to the Company at its address for
notice set forth in Section 12 and upon payment of the Exercise Price multiplied
by the number of Warrant Shares that the Holder intends to purchase hereunder,
in the manner provided hereunder, all as specified by the Holder in the Form of
Election to Purchase, the Company shall promptly (but in no event later than 3
business days after the Date of Exercise (as defined herein)) issue or cause to
be issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends except
(i) either in the event that a registration statement covering the resale of the
Warrant Shares and naming the Holder as a selling stockholder thereunder is not
then effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant. The Company
shall, upon request of the Holder, if available, use its best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar functions.
A "Date of Exercise" means the date on which the Holders shall have
delivered to the Company (i) this Warrant (or any New Warrant, as applicable),
with the Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by the
third (3rd) Trading Day after the Date of Exercise, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for
each day after such third (3rd) Trading Day until such certificates are
delivered. Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon exercise within the period specified herein and the Holder
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
(c) In addition to any other rights available to the Holder, if the Company
fails to deliver to the Holder certificate or certificates representing the
Warrant Shares pursuant to Section 4(a) by the third (3rd) Trading Day after the
Date of Exercise, and if after such third (3rd) Trading Day the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a "Buy-In"), then the Company shall
pay (1) in cash to the Holder the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for
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the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required to
deliver pursuant to Section 4(b) to deliver to the Holder in connection with the
exercise at issue by (B) the Per Share Market Value at the time of the
obligation giving rise to such purchase obligation and (2) deliver to the Holder
the number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations under Section 4(b).
For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with a market price on the date of exercise totaled $10,000, under
clause (A) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. If the
Company breaches its obligations under this Warrant, then, in addition to any
other liabilities the Company may have hereunder and under applicable law, the
Company shall pay or reimburse the Holder on demand for all costs of collection
and enforcement (including reasonable attorneys fees and expenses).
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of
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persons other than the Holder (taking into account the adjustments and
restrictions of Section 8). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section. Upon each such adjustment of the Exercise
Price pursuant to this Section, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(i) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate)
or otherwise make a distribution or distributions on shares of its Common
Stock or on any other class of capital stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and
of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations.
(ii) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the
right thereafter to exercise this Warrant only into the shares of stock and
other securities and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification, transfer or share
exchange, and the Holder shall be entitled upon such event to receive such
amount of securities or property equal to the amount of Warrant Shares such
Holder would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification or share exchange. The terms of
any such reclassification or share exchange shall include such terms so as
to continue to give to the Holder the right to receive the securities or
property set forth in this Section 8(b) upon any exercise following any
such reclassification or share exchange.
(iii) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in
Sections 8(i), (ii) and (iv)), then in each such case the Exercise Price
shall be determined by
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multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(iv) If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while
this Warrant is outstanding, shall, other than in connection with: (i) the
granting of options or warrants to employees, officers, directors, or
information technology consultants of the Company, (ii) shares of Common
Stock issuable upon exercise of currently outstanding options and warrants
and upon conversion of any currently outstanding convertible securities or
debt of the Company (other than shares of the Company's Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock
(collectively, the "Preferred Stock")), in each case to the extent
disclosed in Schedule 2.1(c) to the Purchase Agreement of even date hereof
pursuant to which this Warrant was issued but not with respect to any
amendment or modification thereof, (iii) shares of Common Stock issuable
upon exercise of the Closing Warrants (as defined in the Purchase
Agreement) in accordance with the terms thereof, and (iv) the granting of
warrants to acquire up to an aggregate of 50,000 shares of Common Stock at
a price per share of Common Stock equal to or greater than the market price
of the Common Stock on the date of the issuance thereof, in connection with
bona fide debt, credit or equipment financing transactions but shall not
include transactions in which the Company is issuing warrants to an entity
whose primary business is investing in securities, issue shares of Common
Stock or rights, warrants, options or other securities or debt that is
convertible into or exchangeable for shares of Common Stock ("Common Stock
Equivalents"), entitling any person to acquire shares of Common Stock at a
price per share less than 115% of the closing sales price of the Common
Stock on the date hereof (the "Trigger Price") (if the holder of the Common
Stock or Common Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price less than the Trigger Price, such
issuance shall be deemed to have occurred for less than the Trigger Price),
then the Exercise Price shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Common Stock or such Common Stock Equivalents
plus the number of shares of Common Stock which the offering price for such
shares of Common Stock or Common Stock Equivalents would purchase at the
Trigger Price, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock so issued or issuable, provided,
that for purposes hereof, all shares of Common Stock that are issuable upon
conversion, exercise or exchange of Common Stock Equivalents shall be
deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. However, upon the expiration of any
Common Stock Equivalents the issuance of which resulted in an adjustment in
the Exercise Price pursuant to this Section, if any such Common Stock
Equivalents
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shall expire and shall not have been exercised, the Exercise Price shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Exercise Price made pursuant to the
provisions of this Section after the issuance of such Common Stock Equivalents)
had the adjustment of the Exercise Price made upon the issuance of such Common
Stock Equivalents been made on the basis of offering for subscription or
purchase only that number of shares of the Common Stock actually purchased upon
the exercise of such Common Stock Equivalents actually exercised.
Notwithstanding anything herein to the contrary, all of the issued and
outstanding shares of the Preferred Stock on the date hereof shall be considered
Common Stock Equivalents and the Exercise Price shall be subject to adjustment
in relation thereto pursuant to the terms hereof.
(v) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of
related transactions, the Holder shall have the right thereafter to
exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common
Stock following such merger, consolidation or sale, and the Holder shall be
entitled upon such event or series of related events to receive such amount
of securities, cash and property as the Common Stock for which this Warrant
could have been exercised immediately prior to such merger, consolidation
or sales would have been entitled. The terms of any such merger, sale or
consolidation shall include such terms so as continue to give the Holder
the right to receive the securities, cash and property set forth in this
Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
(vi) For the purposes of this Section 8, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or
(B) to subscribe for or purchase Common Stock or securities
convertible or exchangeable into shares of Common Stock, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held
by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(vii) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Exercise Price is adjusted pursuant to Section
8(iii) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which
shall be a nationally recognized accounting firm), in which case the
adjustment shall be equal to the average of the adjustments recommended by
each of the Appraiser and such
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appraiser. The Holder shall promptly mail or cause to be mailed to the Company,
a notice setting forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Such adjustment
shall become effective immediately after the record date mentioned above.
(ix) If (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; (ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (iii) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.
9. Payment of Exercise Price. The Holder shall pay the Exercise Price in
one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available funds;
or
(b) Cashless Exercise. The Holder may surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined
as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
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A = the average of the closing sale prices of the Common
Stock for the five (5) trading days immediately prior to
(but not including) the Date of Exercise as reported by
Bloomberg Information Systems, Inc. (or any successor to
its function of reporting stock prices).
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such exercise
and held by such Holder after application of this Section. Since the Holder will
not be obligated to report to the Company the number of shares of Common Stock
it may hold at the time of an exercise hereunder, unless the exercise at issue
would result in the issuance of shares of Common Stock in excess of 4.999% of
the then outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof, the
Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular exercise
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of this
Warrant is exercisable shall be the responsibility and obligation of the Holder.
If the Holder has delivered a Form of Election to Purchase for a number of
Warrant Shares that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and, at the option of the Holder, either keep the portion of the Warrant
tendered for exercise in excess of the permitted amount hereunder for future
exercises or return such excess portion of the Warrant to the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such exercise
and held by such Holder after application of this Section. Since the Holder will
not be obligated to report to the Company the number of shares of Common Stock
it may hold at the time of an exercise hereunder, unless the exercise at issue
would result in the issuance of shares of Common Stock in excess of 9.999% of
the then outstanding shares of Common Stock without regard
-11-
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular exercise hereunder and to the extent that the Holder determines that
the limitation contained in this Section applies, the determination of which
portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that, without regard to any other shares
that the Holder or its affiliates may beneficially own, would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and, at the option of the Holder, either keep
the portion of the Warrant tendered for exercise in excess of the permitted
amount hereunder for future exercises or return such excess portion of the
Warrant to the Holder. The provisions of this Section may be waived by a Holder
(but only as to itself and not to any other Holder) upon not less than 61 days
prior notice to the Company. Other Holders shall be unaffected by any such
waiver.
(c) If the Company Stock is then listed for trading on the Nasdaq or the
Nasdaq SmallCap Market and the Company has not obtained the Shareholder Approval
(as defined below), then the Company may not issue in excess of the product of
(i) 1,937,453 Warrant Shares upon exercise of this Warrant and (ii) the quotient
obtained by dividing (x) the number of shares of Common Stock issued and sold to
the original Holder on the Closing Date by (y) the number of shares of Common
Stock issued and sold by the Company on the Closing Date (such number of shares,
the "Issuable Maximum"). The Issuable Maximum equals 19.999% of the number of
shares of Common Stock outstanding multiplied by the quotient obtained by
dividing (x) the number of shares of Common Stock issued and sold to the
original Holder on the Closing Date by (y) the number of shares of Common Stock
issued and sold by the Company on the Closing Date. If any Holder shall no
longer hold Warrants then such Holder's remaining portion of the Issuable
Maximum shall be allocated pro-rata among the remaining Holders. If on any Date
of Exercise (A) the Company Stock is listed for trading on the Nasdaq or the
Nasdaq SmallCap Market, (B) the Exercise Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
exercise in full of this Warrant, together with any shares of Common Stock
previously issued upon exercise of this Warrant, would equal or exceed the
Issuable Maximum, and (C) the Company shall not have previously obtained the
vote of shareholders, if any, as may be required by the applicable rules and
regulations of the Nasdaq Stock Market to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms hereof (the
"Shareholder Approval"), then the Company shall issue to the Holder a number of
shares of Common Stock equal to the Issuable Maximum and, with respect to the
shares whose issuance would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum, (the "Excess Warrant Shares"), the Holder shall
have the option to require the Company to either (1) use its best efforts to
obtain the Shareholder Approval applicable to such issuance as soon as possible,
but in any event no later than 60 days after such request (such 60th day, the
"Target Date") or (2) pay to the Holder, within one (1) Trading Day from the
request therefor, an amount in cash equal to the product of (x) the Excess
Warrant Shares multiplied by (y) the closing sales price of the Common Stock on
(a) the Target Date or (b) the Date of Exercise giving rise to the obligation to
seek Shareholder Approval, whichever is greater (the "Cash Payment"). In the
event the Holder has elected to require the Company to seek the Shareholder
Approval pursuant to clause (1) of the
-12-
immediately preceding sentence and the Company does not obtain the Shareholder
Approval on or prior to the Target Date, then, on the Target Date, the Company
shall pay the Cash Payment to the Holder. If the Company fails to pay the Cash
Payment in full pursuant to this Section within seven (7) days after the date
payable, the Company will pay interest on such amount at a rate of 18% per
annum, or such lesser maximum amount that is permitted to be paid by applicable
law, to the Holder, accruing daily from the date payable until such amount, plus
all such interest thereon, is paid in full. The Company and the Holder
understand and agree that shares of Common Stock issued upon exercise of this
Warrant and then held by the Holder or an affiliate thereof may not cast votes
or be deemed outstanding for purposes of any vote to obtain the Shareholder
Approval.
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 14, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 P.M. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 P.M. (New York City time) on any date and earlier than
11:59 P.M. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
00 Xxxxxx Xxxx, Xxxxxxxxx, XX 00000, facsimile: (000) 000-0000, attention Chief
Executive Officer, or (ii) if to the Holder, to the Holder at the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section.
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty (30) days' notice to the Holder, the Company may appoint a new warrant
agent.
(b) Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company
or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor warrant agent under
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
-13-
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant may be
amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) The corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS]
-14-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
VIISAGE TECHNOLOGY, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
-15-
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Viisage Technology, Inc.
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock ("Common Stock"), $.001 par value per share, of Viisage
Technology, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: Name of Holder:
_________________, _______
(Print)_______________________________
(By:)_________________________________
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Viisage Technology,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Viisage Technology, Inc. with full power
of substitution in the premises.
Dated:
_____________________, _______
___________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
___________________________________________
Address of Transferee
___________________________________________
___________________________________________
In the presence of:
________________________
Exhibit A
(i) "Adjustment Price" means the average of the Per Share Market Values for
any 10 Trading Days (which need not be consecutive) during the 25 consecutive
Trading Days preceding a Vesting Date, as selected by the Holder (which may
include Trading Days prior to the Effective Date).
(ii) "Applicable Share Number" means 1/3 of the number of shares of Common
Stock purchased by the Holder pursuant to the Purchase Agreement.
(iii) "Business Day" shall have the meaning set forth in the Purchase
Agreement.
(iv) "Closing Date" shall have the meaning set forth in the Purchase
Agreement.
(v) "Commission" means the Securities and Exchange Commission.
(vi) "Effective Date" the date on which the Underlying Shares Registration
Statement is first declared effective by the Commission.
(vii) "Nasdaq" means the Nasdaq National Market.
(viii) "Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq or on
any Subsequent Market on which the Common Stock is then listed or quoted, as
reported by Bloomberg Information Services, Inc. (or any successor entity
succeeding to its function of reporting prices), or if there is no such price on
such date, then the closing bid price on the Nasdaq or on such Subsequent Market
on the date nearest preceding such date, as reported by Bloomberg Information
Services, Inc. (or any successor entity succeeding to its function of reporting
prices), or (b) if the Common Stock is not then listed or quoted on the Nasdaq
or a Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Holders of a majority
of the applicable Warrant Shares.
(ix) "Purchase Agreement" means the Securities Purchase Agreement, dated
the date hereof to which the Company and the original Holder are parties and
pursuant to which this Warrant was issued.
(x) "Purchase Price" means $10.2063 (which number shall be subject to
equitable adjustment for stock splits, recombinations and similar events).
(xi) "Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof to which the Company and the original Holder
are parties.
(xii) "Subsequent Market" shall mean any of the New York Stock Exchange,
American Stock Exchange, Inc or Nasdaq SmallCap Market.
(xiii) "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock s not listed on the
Nasdaq or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean a Business Day.
(xiv) "Transaction Documents"shall have the meaning set forth in the
Purchase Agreement.
(xv) "Underlying Shares Registration Statement" shall have the meaning
ascribed to it in the Purchase Agreement.
