WARRANT ANTIDILUTION AGREEMENT
THIS WARRANT ANTIDILUTION AGREEMENT (the "Agreement") is entered into
as of April 17, 2001, by and among Providence Capital IX, Inc., a
corporation duly organized and existing under the laws of the State of
Colorado (the "Company") and Xxxxxx Private Equity, LLC (hereinafter
referred to as "Xxxxxx").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Equity Line") of up to
Ten Million (10,000,000) shares of Common Stock of the Company, excluding
shares issued paid upon exercise of the Warrants, of Common Stock of the
Company pursuant to that certain Investment Agreement (the "Investment
Agreement") between the Company and Xxxxxx dated on or about April 17,
2001, the Company has agreed to sell and Xxxxxx has agreed to purchase,
from time to time as provided in the Investment Agreement, shares of the
Company's Common Stock ; and
WHEREAS, pursuant to the terms of the Investment Agreement, the
Company has agreed, among other things, to issue to Xxxxxx Commitment
Warrants, as defined in the Investment Agreement, to purchase a number of
shares of Common Stock, exercisable for five (5) years from their
respective dates of issuance.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. ISSUANCE OF COMMITMENT WARRANTS. As compensation for entering into
the Equity Line, Xxxxxx received a warrant convertible into shares of the
Company's Common Stock, in the form attached hereto as EXHIBIT A (the
"Commitment Warrants").
2. ISSUANCE OF ADDITIONAL WARRANTS. On each six month anniversary of the
date of issuance of the Commitment Warrants (each, a "Six Month Anniversary
Date"), the Company shall issue to the Investor additional warrants (the
"Additional Warrants"), to purchase a number of shares of Common Stock, if
necessary, such that the sum of the number of Commitment Warrants and the
number of Additional Warrants issued to Investor shall equal at least "Y%"
of the number of fully diluted shares of Common Stock of the Company on
such Six Month Anniversary Date, where "Y" shall equal 7% for the first Six
Month Anniversary Date, and shall be reduced by 0.5% for each Six Month
Anniversary Date beginning on and following the second Six Month
Anniversary Date. The Additional Warrants shall be in the form of EXHIBIT
A hereto, and shall initially be exerciseable at the same price as the
Commitment Warrants (as most recently reset), shall have the same reset
provisions as the Commitment Warrants (which resets shall occur on each six
month anniversary of the date of issuance of the applicable Additional
Warrant throughout the term of the applicable Additional Warrant), shall
have piggyback registration rights and shall have a 5-year term.
3. OPINION OF COUNSEL. Concurrently with the issuance and delivery of
the Commitment Opinion (as defined in the Investment Agreement) to the
Investor, or on the date that is six (6) months after the date of this
Agreement, whichever is sooner, the Company shall deliver to the Investor
an Opinion of Counsel (signed by the Company's independent counsel)
covering the issuance of the Commitment Warrants and the Additional
Warrants, and the issuance and resale of the Common Stock issuable upon
exercise of the Warrants and the Additional Warrants.
4. CHANGE IN CORPORATE ENTITY. The Company shall not, at any time after
the date hereof, enter into any merger, consolidation or corporate
reorganization of the Company with or into, or transfer all or
substantially all of the assets of the Company to, another entity unless
the resulting successor or acquiring entity in such transaction, if not the
Company (the "Surviving Entity"), (i) has Common Stock listed for trading
on Nasdaq or on another national stock exchange and is a Reporting Issuer,
(ii) assumes by written instrument the Company's obligations with respect
to this Warrant Antidilution Agreement and the Additional Warrants,
including but not limited to the obligations to deliver to the Investor
shares of Common Stock and/or securities that Investor is entitled to
receive pursuant to this Investment Agreement and upon exercise of the
Additional Warrants and agrees by written instrument to reissue, in the
name of the Surviving Entity, any Additional Warrants (each in the same
terms, including but not limited to the same reset provisions, as the
Commitment Warrants originally issued or required to be issued by the
Company) that are outstanding immediately prior to such transaction, making
appropriate proportional adjustments to the number of shares represented by
such Warrants and the exercise prices of such Warrants to accurately
reflect the exchange represented by the transaction.
5. ARBITRATION; GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia applicable to
agreements made in and wholly to be performed in that jurisdiction, except
for matters arising under the Act or the Securities Exchange Act of 1934,
which matters shall be construed and interpreted in accordance with such
laws. Any controversy or claim arising out of or related to the
Transaction Documents or the breach thereof, shall be settled by binding
arbitration in Atlanta, Georgia in accordance with the Expedited Procedures
(Rules 53-57) of the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). A proceeding shall be commenced upon
written demand by Company or any Investor to the other. The arbitrator(s)
shall enter a judgment by default against any party, which fails or refuses
to appear in any properly noticed arbitration proceeding. The proceeding
shall be conducted by one (1) arbitrator, unless the amount alleged to be
in dispute exceeds two hundred fifty thousand dollars ($250,000), in which
case three (3) arbitrators shall preside. The arbitrator(s) will be chosen
by the parties from a list provided by the AAA, and if they are unable to
agree within ten (10) days, the AAA shall select the arbitrator(s). The
arbitrators must be experts in securities law and financial transactions.
The arbitrators shall assess costs and expenses of the arbitration,
including all attorneys' and experts' fees, as the arbitrators believe is
appropriate in light of the merits of the parties' respective positions in
the issues in dispute. Each party submits irrevocably to the jurisdiction
of any state court sitting in Atlanta, Georgia or to the United States
District Court sitting in Georgia for purposes of enforcement of any
discovery order, judgment or award in connection with such arbitration.
The award of the arbitrator(s) shall be final and binding upon the parties
and may be enforced in any court having jurisdiction. The arbitration
shall be held in such place as set by the arbitrator(s) in accordance with
Rule 55.
Although the parties, as expressed above, agree that all claims,
including claims that are equitable in nature, for example specific
performance, shall initially be prosecuted in the binding arbitration
procedure outlined above, if the arbitration panel dismisses or otherwise
fails to entertain any or all of the equitable claims asserted by reason of
the fact that it lacks jurisdiction, power and/or authority to consider
such claims and/or direct the remedy requested, then, in only that event,
will the parties have the right to initiate litigation respecting such
equitable claims or remedies. The forum for such equitable relief shall be
in either a state or federal court sitting in Atlanta, Georgia. Each party
waives any right to a trial by jury, assuming such right exists in an
equitable proceeding, and irrevocably submits to the jurisdiction of said
Georgia court. Georgia law shall govern both the proceeding as well as the
interpretation and construction of this Agreement and the transaction as a
whole.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 17th day of April, 2001.
PROVIDENCE CAPITAL IX, INC. SUBSCRIBER:
XXXXXX PRIVATE EQUITY, LLC.
By: ________________________________ By: ________________________________
Xxxxxxx Xxxxxx, Jr., President Xxxx X. Xxxxxx, Manager
1250 Turks Head Building 000 Xxxxxxxx Xxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000 Suite 300
Telephone: (000) 000-0000 Xxxxxxx, XX 00000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000
