THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE LAW. NO INTEREST HEREIN MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN
CONSENT OF THIS CORPORATION.
No. X-X- Warrant to purchase
Issued: 30,000 shares of Common
Stock (subject to adjustment)
CENTERSPAN COMMUNICATIONS CORPORATION
COMMON STOCK
PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Xxxxx Capital Management (the
"Holder") is entitled to exercise this Warrant to purchase from the Company
Thirty Thousand (30,000) fully paid and nonassessable shares of the Company's
Common Stock, $0.01 par value per share (the "Common Stock"), on the terms and
subject to the conditions set forth herein. The shares of Common Stock issuable
upon the exercise of this Warrant are referred to herein as the "Warrant
Shares." The number of Warrant Shares issuable upon exercise of this Warrant and
the Exercise Price (as defined below) are subject to adjustment as provided
herein. The term "Warrant" as used herein shall include this Warrant and any
warrants delivered in substitution hereof as provided herein.
1.1 TERM OF WARRANT
This Warrant may be exercised by the Holder, in whole but not in part,
at any time prior to the earlier of (a) August 30, 2004, or (b) the closing of a
Corporate Transaction (as defined below) (the "Exercise Period"). As used
herein, the term "Corporate Transaction" means the sale of all or substantially
all the assets of the Company or the acquisition of the Company by another
entity by means of a merger, consolidation, reorganization or any other
transaction or series of related transactions resulting in the exchange of the
outstanding shares of the Company for securities or
consideration issued or caused to be issued by the acquiring entity or any of
its affiliates and as a result of which the shareholders of the Company
immediately prior to such transaction hold or receive, by virtue of their
ownership of securities of the Company, less than fifty percent (50%) of the
capital stock of the resulting entity; provided, however, that the sale of
the Company's hardware business assets to Guillemot Corporation, S.A. will
not constitute a "Corporate Transaction," and such sale will not be subject
to the notice provisions of Section 4.5.
1.2 EXERCISE PRICE
The Exercise Price at which this Warrant may be exercised shall be
$18.258 per share of Common Stock, as adjusted from time to time pursuant to
Section 4 hereof.
1.3 METHOD OF EXERCISE
1.3.1 PROCEDURE FOR EXERCISE
This Warrant may be exercised by the Holder, in whole but not in part,
by delivering to the Company (i) this Warrant, (ii) cash, a wire transfer of
funds or a check payable to the Company in the amount of the Exercise Price
multiplied by the number of shares for which this Warrant is being exercised
(the "Purchase Price"), and (iii) the form of Election to Purchase attached
hereto as Annex A, duly completed and executed by the Holder. This Warrant shall
be deemed to have been exercised immediately prior to the close of business on
the date of its surrender for exercise as provided above.
1.3.2 NET EXERCISE RIGHTS
Notwithstanding the payment provisions set forth above, the Holder may
elect to receive Warrant Shares in an amount equal to the value (as determined
below) of this Warrant by surrender of this Warrant at the principal office of
the Company, together with notice of such election, in which case the Company
shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y (A-B)
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A
WHERE: X = THE NUMBER OF WARRANT SHARES TO BE ISSUED TO THE HOLDER
Y = THE NUMBER OF WARRANT SHARES SUBJECT TO THE PORTION
OF THIS WARRANT BEING EXERCISED
A = THE FAIR MARKET VALUE (AS DEFINED BELOW) OF ONE WARRANT SHARE
B = THE EXERCISE PRICE
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For purposes of the above calculation, the fair market value of a
Warrant Share shall be the average of the closing bid and asked prices of the
Company's Common Stock as quoted on the Nasdaq National Market System or on any
exchange on which such Common Stock is then listed, whichever is applicable, for
the five trading days prior to the date of exercise of this Warrant.
2. DELIVERY OF STOCK CERTIFICATES
Within 10 days after the payment of the Purchase Price following the
exercise of this Warrant, the Company, at its expense, shall issue in the name
of the Holder a certificate for the number of fully paid and nonassessable
Warrant Shares to which the Holder shall be entitled upon such exercise and
payment.
3. COVENANTS AS TO WARRANT SHARES
3.1 RESERVATION OF WARRANT SHARES
The Company shall at all times have authorized and reserve and keep
available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of this
Warrant, the number of Warrant Shares deliverable upon full exercise of this
Warrant.
3.2 ISSUANCE OF WARRANT SHARES
The Company covenants that all Warrant Shares shall, upon issuance
thereof in accordance with the terms of this Warrant, be (a) duly authorized,
validly issued, fully paid and nonassessable and (b) free from all liens,
pledges, charges and security interests created by the Company.
4. ADJUSTMENTS
4.1 ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
The Exercise Price and the number of Warrant Shares issuable upon the
exercise of this Warrant shall be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of such Exercise Price pursuant to
this Section 4, this Warrant shall thereafter entitle the Holder 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.
-3-
4.2 ADJUSTMENT OF EXERCISE PRICE UPON EXTRAORDINARY COMMON STOCK
EVENT
Upon the happening of an Extraordinary Common Stock Event (as defined
below) after the issuance date of this Warrant, the Exercise Price shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by multiplying the then effective Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Extraordinary Common Stock Event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
after such Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Exercise Price. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (x) the issuance of
additional shares of Common Stock (or other securities or rights convertible
into or entitling the holder thereof to receive additional shares of Common
Stock ) as a dividend or other distribution on outstanding Common Stock of the
Company, (y) a split or subdivision of outstanding shares of Common Stock into a
greater number of shares of Common Stock, or (z) a combination of outstanding
shares of Common Stock into a smaller number of shares of Common Stock.
4.3 CAPITAL REORGANIZATION OR RECLASSIFICATION
If the Common Stock issuable upon the exercise of this Warrant shall be
changed into the same or a different number of shares of any class or classes of
stock of the Company, whether by capital reorganization, reclassification or
otherwise (other than an Extraordinary Common Stock Event), then and in each
such event the Holder shall have the right thereafter to exercise this Warrant
for the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change by holders
of the number of shares of Common Stock into which this Warrant might have been
converted immediately prior to such reorganization, reclassification or change,
all subject to adjustment as provided herein. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the Holder after the reorganization,
recapitalization or change to the end that the provisions of this Section 4
(including adjustment of the Exercise Price then in effect and the number of
shares issuable upon exercise of this Warrant) shall be applicable after that
event as nearly equivalent as may be practicable.
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4.4 NOTICE OF ADJUSTMENT
Whenever the number of shares of Common Stock or other stock or
property issuable upon the exercise of this Warrant or the Exercise Price is
adjusted, then and in each such case the Company shall promptly deliver a notice
to the Holder, which notice shall state the Exercise Price resulting from such
adjustment and/or the increase or decrease, if any, in the number of shares of
Common Stock or other stock or property issuable upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
4.5 OTHER NOTICES
In the event that the Company shall propose at any time:
(a) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or
earned surplus;
(b) to offer for subscription to the holders of its Common
Stock any additional shares of stock of any class or series or other
rights;
(c) to effect any reclassification or recapitalization of the
shares of its Common Stock outstanding involving a change in the Common
Stock; or
(d) to merge or consolidate with or into any other
corporation, to sell, lease or convey all or substantially all of its
property or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Company shall send to the Holder:
(i) at least 20 days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining rights to
vote in respect of the matters referred to in (c) and (d) above; and
(ii) in the case of the matters referred to in (c) and (d)
above, at least 20 days' prior written notice of the date when the same
shall take place (and, if applicable, specifying the date on which the
holders of the Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon the
occurrence of such events).
-5-
5. FRACTIONAL SHARES
No fractional shares shall be issued upon the exercise of this Warrant,
and the number of shares of Common Stock to be issued shall be rounded to the
nearest whole share, determined on the basis of the total number of shares of
Common Stock issuable upon such aggregate conversion.
6. TRANSFERS
6.1 RESTRICTIONS ON TRANSFER
No Warrant Shares or any interest therein may be transferred unless (a)
such transfer is registered under the Securities Act of 1933, as amended (the
"Securities Act"), (b) the Company has received an opinion of legal counsel for
the Holder reasonably satisfactory to the Company stating that the transfer is
exempt from the registration requirements of the Securities Act, or (c) the
Company otherwise satisfies itself that such transfer is exempt from
registration.
6.2 TRANSFERS
The Company shall register on the books of the Company maintained at
its principal office the permitted transfer of this Warrant upon surrender to
the Company of this Warrant, with the form of Assignment attached hereto as
Annex B duly completed and executed by the Holder. Upon any such registration of
transfer, a new Warrant, in substantially the form of this Warrant, evidencing
this Warrant so transferred shall be issued, at the Company's expense, to the
transferee.
7. LEGEND
Legends setting forth or referring to the applicable restrictions set
forth in Section 6.1 may be placed on this Warrant, any replacement hereof or
any certificate representing the Warrant Shares, and a stop transfer restriction
or order shall be placed on the books of the Company and with any transfer agent
until such securities may be sold or otherwise transferred in accordance with
Section 6.1.
8. HOLDER AS OWNER
The Company may deem and treat the holder of record of this Warrant as
the absolute owner hereof for all purposes regardless of any notice to the
contrary.
-6-
9. NO SHAREHOLDER RIGHTS
This Warrant shall not entitle the Holder to any voting rights or any
other rights as a shareholder of the Company or to any other rights whatsoever
except the rights stated herein; and no dividend or interest shall be payable or
shall accrue in respect of this Warrant or the Warrant Shares, until and to the
extent that this Warrant shall be exercised.
10. REGISTRATION RIGHTS
(a) Subject to Section 10(b) below, the Company shall file, with
respect to the shares of Common Stock issuable under this Warrant, a
registration statement on Form S-3 (or any successor form) on or before the
180th day after the issuance date of this Warrant to register the shares
issuable upon the exercise of this Warrant under the Securities Act. The Company
shall use commercially reasonable efforts to have the registration statement
declared effective and to maintain the effectiveness of such registration
statement (and maintain the current status of the prospectus or prospectuses
contained therein) for at least 120 days.
(b) The Company shall not be obligated to effect any such registration
pursuant to Section 10(a):
(1) if Form S-3 is not available for such offering by the
Holder;
(2) if the Company shall furnish to the Holder a certificate
signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
shareholders for such Form S-3 registration to be effected at such
time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more
than ninety (90) days after the expiration of the 180-day period set
forth above; or
(3) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent
to service of process in effecting such registration.
(c) The Company shall notify the Holder in writing at least thirty (30)
days prior to filing any registration statement under the Securities Act for
purposes of effecting a public offering of securities of the Company (including,
but not limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
registration under Section 10(a)
-7-
of this Warrant or to any employee benefit plan or a corporate
reorganization) and will afford the Holder an opportunity to include in such
registration statement all or any part of the shares issuable upon the
exercise of this Warrant, subject to the provisions of Sections 10(d) and
10(e) below. If the Holder wants to include in any such registration
statement all or any part of the shares issuable upon the exercise of this
Warrant, the Investor shall within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of shares of Common
Stock the Investor wishes to include in such registration statement.
(d) If a registration statement under which the Company gives notice
under Section 10(c) is for an underwritten offering, then the Company shall so
advise the Holder. In such event, the right of the Holder to include any of the
shares issuable upon the exercise of this Warrant in a registration pursuant to
Section 10(c) shall be conditioned upon the Holder's participation in such
underwriting and the inclusion of the Holder's shares of Common Stock in the
underwriting on the same terms and conditions as the other participants in such
offering, including, without limitation, entering into an underwriting agreement
in customary form with the managing underwriter or underwriters selected for
such underwriting (including a market stand-off agreement of up to 180 days if
required by such underwriters). Notwithstanding any other provision of this
Warrant, if the managing underwriter(s) determine(s) in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, FIRST, to the
Company, SECOND, to each holder of registration rights granted by the Company
before the issuance date of this Warrant that contractually require the Company
to include such holder's shares on a priority basis, and THIRD, to the Holder
and any other holder of registration rights granted by the Company (excluding
those covered above), on a pro rata basis based on the total number of shares of
Common Stock then sought to be included by each in such offering. If the Holder
disapproves of the terms of any such underwriting, the Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter(s),
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any shares of Common Stock excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration.
(e) The Holder may not have any shares of Common Stock registered
pursuant to any registration statement initiated pursuant to the Registration
Rights Agreement, dated as of June 9, 1999, among the Company, Strong River
Investment Inc., and Bay Harbor Investments, Inc.
-8-
11. GOVERNING LAW; CONSTRUCTION
The validity and interpretation of the terms and provisions of this
Warrant shall be governed by the laws of the State of Oregon. The descriptive
headings of the several sections of this Warrant are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions thereof.
12. LOST WARRANT CERTIFICATE
Upon receipt by the Company of satisfactory evidence of the loss,
theft, destruction or mutilation of this Warrant and either (in the case of
loss, theft or destruction) indemnification reasonably satisfactory to the
Company or (in the case of mutilation) the surrender of this Warrant for
cancellation, the Company will execute and deliver to the Holder, without
charge, a new Warrant of like denomination.
13. WAIVERS AND AMENDMENTS
This Warrant or any provision hereof may be amended or waived only by a
statement in writing signed by the Company and the Holder.
14. NOTICES
Any notice required by the provisions of this Warrant to be given to
the Holder shall be deemed given two days after being deposited in the United
States mail, postage prepaid and addressed to such Holder's address appearing on
the books of the Company.
Any notice required by the provisions of this Warrant to be given to
the Company shall be deemed given two days after being deposited in the United
States mail, postage prepaid and addressed to CenterSpan Communications
Corporation, 0000 XX Xxxxxxxxx Xxxxxxx, Xxxxxxxxx, XX 00000, Attention: Xxxxx X.
Xxxxxxxx, or at such other address as specified in a notice delivered to the
Holder as set forth above.
15. BINDING EFFECT
This Warrant shall be binding upon the Company and its successors and
assigns, and shall inure to the benefit of and be enforceable by the Holder and
its successors and permitted assigns.
-9-
16. INVESTMENT INTENT, ETC.
By accepting this Warrant, the Holder represents that (a) the Holder is
acquiring this Warrant and the Warrant Shares issuable upon exercise hereof for
investment and not with a view to, or for sale in connection with, any
distribution thereof; (b) the Holder can bear the economic risk of an investment
in the Warrant Shares (including possible complete loss of such investment) for
an indefinite period of time and has such knowledge and experience in financial
and business matters that the Holder is capable of evaluating the merits and
risks of an investment in the Warrant Shares; (c) the Holder understands that
this Warrant and the Warrant Shares have not been registered under the
Securities Act, or under the securities laws of any jurisdiction, by reason of
reliance upon certain exemptions, and that the reliance of the Company on such
exemptions is predicated upon the accuracy of the Holder's representations in
this Section; (d) the Holder is familiar with Regulation D promulgated under the
Securities Act and is an "accredited investor" as defined in Rule 501(a) of
Regulation D; and (e) the Holder is familiar with Rule 144 under the Securities
Act, as currently in effect, and understands the resale limitations that are or
would be imposed thereby and by the Securities Act on this Warrant and the
Warrant Shares to the extent such securities are characterized as "restricted
securities" under the United States federal securities laws inasmuch as they are
acquired from the Company in a transaction not involving a public offering.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
CENTERSPAN COMMUNICATIONS CORPORATION
By
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Name: Xxxxx X. Xxxxxxxx
Title: Chief Executive Officer and
President
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ANNEX A
FORM OF ELECTION TO PURCHASE
To CenterSpan Communications Corporation:
The undersigned hereby elects to purchase ___________ shares of Common
Stock of CenterSpan Communications Corporation issuable upon the exercise of the
within Warrant, and requests that a certificate for such shares shall be issued
in the name of the undersigned holder and delivered to the address indicated
below.
[Payment enclosed in the amount of $ ]
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[THE UNDERSIGNED ELECTS THAT THE WARRANT BE EXERCISED IN ACCORDANCE
WITH SECTION 1.3.2 thereof.]
Dated:
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Name of holder of Warrant:
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(please print)
Address:
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Signature:
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ANNEX B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ______________________________________ hereby
sells, assigns and transfers to the assignee set forth below all of the rights
of the undersigned in and to the number of Warrant Shares (as defined in and
evidenced by the foregoing Warrant) set opposite the name of such assignee below
and in and to the foregoing Warrant with respect to said Warrant Shares:
NAME OF ASSIGNEE ADDRESS NUMBER OF SHARES
---------------- ------- ----------------
Dated:
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Name of holder of Warrant:
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(please print)
Address:
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Signature:
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