Exhibit 4.1
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EXCEPT AS
OTHERWISE SET FORTH HEREIN OR IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF
DECEMBER 31, 1997, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH LAWS.
Right to Purchase
150,000 Shares of
Common Stock,
par value $.01 per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, RGC International Investors, LDC,
or its registered assigns permitted under the terms hereof (the "Holders"), is
entitled to purchase from Softnet Systems, Inc., a New York corporation (the
"Company"), at any time or from time to time during the period specified in
Paragraph 2 hereof, One Hundred Fifty Thousand (150,000) fully paid and
nonassessable shares of the Company's Common Stock, par value $.01 per share,
(the "Common Stock"), at an exercise price of $7.95 per share (the "Exercise
Price"). The term "Warrant Shares," as used herein, refers to the shares of
Common Stock purchasable hereunder. The number of Warrant Shares and the amount
of the Exercise Price are subject to adjustment as provided in Paragraph 4
hereof. The term Warrants means this Warrant and the other warrants issued
pursuant to that certain Securities Purchase Agreement, dated December 31, 1997,
by and between the Company and the Buyer listed on the execution page thereof
(the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions, and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day
(defined as a day which is not a day on which banking institutions in New York
State are authorized by law to close) at the Company's principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), and upon (i) payment to the Company in cash, by
certified or official bank check or by wire transfer for the account of the
Company of the Exercise Price for the Warrant Shares specified in the Exercise
Agreement or (ii) if (a) the resale of the Warrant Shares by the holder is not
then registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), at any time when
registration is so required pursuant to the Registration Rights Agreements, or
(b) the Company has provided written notice to the holder stating that cashless
exercise of this Warrant will be required, and such notice has not been revoked
in writing by the Company, delivery to the Company of a written notice of an
election to effect a "Cashless Exercise" (as defined in Section 11(c) below) for
the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or such holder's
designee, as the record owner of such shares, as of the close of business on the
date on which this Warrant shall have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment shall have been made for such
shares as set forth above. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in the Exercise Agreement,
shall be delivered to the holder hereof within a reasonable time, not exceeding
three (3) business days, after this Warrant shall have been so exercised (the
"Delivery Period"). The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or if such Warrant Shares are registered for resale
under an effective registration statement or if the transfer of such Warrant
Shares is otherwise permitted pursuant to Section 7(f) hereof, such other name
as shall be designated by such holder. If this Warrant shall have been
exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement, and the Company fails
for any reason to deliver, on or prior to the fourth business day following the
expiration of the Delivery Period for such exercise, the number of shares of
Common Stock to which the holder is entitled upon such exercise (an "Exercise
Default"), then the Company shall pay to the holder payments ("Exercise Default
Payments") for an Exercise Default in the amount of (a) (N/365), multiplied by
(b) the amount by which the Market Price (as defined in Section 4(l) below) on
the date the Exercise Agreement giving rise to the Exercise Default is
transmitted in accordance with Section 1 (the "Exercise Default Date") exceeds
the Exercise Price multiplied by (c) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (d) .24,
where N=the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default. The accrued Exercise Default Payment for each calendar month
shall be paid in cash or shall be convertible into Common Stock at the Exercise
Price, at the holder's option, to be specified by the last day of the month in
which such Exercise Default occurred, as follows:
(a) In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth (5th) day of the month following
the month in which it has accrued; and
(b) In the event the holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock (in
accordance with the terms contained in the Certificate of Incorporation (the
"Certificate of Incorporation") governing the Company's Series A Convertible
Preferred Stock (the "Series A Preferred Stock")) at the lower of the Exercise
Price or the Market Price (as defined in Section 4(l)) (as in effect at the time
of conversion) at any time after the fifth (5th) day of the month following the
month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 3(b) or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and each holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
Notwithstanding anything in this Warrant to the contrary, in no event
shall the holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and unconverted shares of Series A Preferred Stock (as
defined in the Securities Purchase Agreement)) or other securities containing
restrictions on conversion or exercise analogous to the provisions in this
paragraph, and (ii) the number of shares of Common Stock issuable upon exercise
of the Warrants (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock. For purposes of the immediately preceding sentence, (x) beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (i) hereof, and (y) a holder may waive the
limitations set forth herein upon not less than sixty-one (61) days prior
written notice to the Company (with such waiver taking effect only upon the
expiration of such sixty-one (61) day notice period).
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the date that is 10 business days following the date on
which this Warrant is issued and delivered pursuant to the terms of the
Securities Purchase Agreement and before 5:00 p.m., New York City time on the
fourth anniversary of the date of such issuance (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to Be Fully Paid. All Warrant Shares will, upon payment
of the Exercise Price and issuance in accordance with the terms of this Warrant,
be validly issued, fully paid, and nonassessable and free from all taxes, liens,
and charges with respect to the issuance thereof.
(b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant (without giving effect to the
limitations on exercise set forth in Section 1 above).
(c) Listing. The Company shall no later than 10 business days
following issuance of this Warrant secure the listing of the shares of Common
Stock issuable upon exercise of the Warrant upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed or become listed (subject to official notice of issuance
upon exercise of this Warrant) and shall maintain, so long as any holder, to the
Company's knowledge after due inquiry, owns any Warrants or Warrant Shares, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any holder, to the
Company's knowledge after due inquiry, owns any Warrants or Warrant Shares.
(d) Certain Actions Prohibited. 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 to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment as provided in
Section 4, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, to the extent
the Warrant is unexercised, the Exercise Price and the number of Warrant Shares
shall be subject to adjustment from time to time as provided in this Paragraph
4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance
of Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e)
hereof, if and whenever during the Exercise Period, the Company issues or sells,
or in accordance with Paragraph 4(b) hereof is deemed to have issued or sold,
any shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price (as
hereinafter defined) on the date of issuance (a "Dilutive Issuance"), then
immediately upon the Dilutive Issuance, the Exercise Price will be reduced to a
price determined by multiplying the Exercise Price in effect immediately prior
to the Dilutive Issuance by a fraction, (i) the numerator of which is an amount
equal to the sum of (x) the number of shares of Common Stock actually
outstanding immediately prior to the Dilutive Issuance, plus (y) the quotient of
the aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the Market Price
in effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the total number of shares of Common Stock Deemed Outstanding (as
defined below) immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is less than
the Market Price on the date of issuance or grant of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance of
such Convertible Securities, then the maximum total number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible Securities,
be deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding sentence, the "price
per share for which Common Stock is issuable upon such conversion or exchange"
is determined by dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect will be readjusted to the
Exercise Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise or conversion of any
warrants, options or convertible securities granted, issued and outstanding on
the date of issuance of this Warrant and set forth on Schedule 3(c) to the
Securities Purchase Agreement, in accordance with the terms of such securities
as of such date; (ii) upon the grant or exercise of any stock or options which
may hereafter be granted or exercised under any employee or director benefit
plan of the Company now existing or to be implemented in the future, so long as
the issuance of such stock or options is approved by the Board of Directors of
the Company or a majority of the members of a committee of independent directors
established for such purpose; (iii) upon the exercise of the Warrants; or (iv)
upon the conversion of the Company's Series A Convertible Preferred Stock.
(c) Subdivision or Combination of Common Stock. If the Company at
any time during the Exercise Period subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at
any time during the Exercise Period combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of this Warrant had such consolidation, merger or sale
or conveyance not taken place. In any such case, the Company will make
appropriate provision to insure that the provisions of this Paragraph 4 will
thereafter be applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this Warrant. The
Company will not effect any consolidation, merger or sale or conveyance unless
prior to the consummation thereof, the successor corporation (if other than the
Company) assumes by written instrument the obligations under this Paragraph 4
and the obligations to deliver to the holder of this Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire.
(f) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (including cash) or rights to acquire its
assets to holders of Common Stock as a partial liquidating dividend, stock
repurchase, by way of return of capital or otherwise, and the Company shall fail
to provide timely notice of such distribution to the holder of this Warrant in
accordance with Section 4(j), then, after the date of record for determining
stockholders entitled to such distribution, but prior to the date of
distribution, the holder of this Warrant shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets (or rights) which would have been
payable to the holder had such holder been the holder of such shares of Common
Stock on the record date for the determination of stockholders entitled to such
distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Treasurer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but, at the option of the
Company, the Company either (i) shall pay a cash adjustment in respect of any
fractional share which would otherwise be issuable in an amount equal to the
same fraction of the Market Price of a share of Common Stock on the date of such
exercise or (ii) shall round up such fraction to the next whole number of shares
of Common Stock.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to, another
corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 15 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall
not affect the validity of the proceedings referred to in clauses (i), (ii),
(iii) and (iv) above.
(k) Certain Events. If, at any time during the Exercise Period, any
event occurs of the type contemplated by the adjustment provisions of this
Paragraph 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Paragraph 4(g) hereof, and the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of shares of Common Stock acquirable upon exercise of this
Warrant so that the rights of the Holder shall be neither enhanced nor
diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of the
last reported sale prices for the shares of Common Stock on the American Stock
Exchange (the "AMEX") for the five (5) trading days immediately preceding such
date as reported by Bloomberg, L.P. ("Bloomberg"), or (ii) if the AMEX is not
the principal trading market for the shares of Common Stock, the average of the
last reported sale prices on the principal trading market for the Common Stock
during the same period as reported by Bloomberg, or (iii) if market value cannot
be calculated as of such date on any of the foregoing bases, the Market Price
shall be the fair market value as reasonably determined in good faith by (a) the
Board of Directors of the Company or, at the option of and at the expense of a
majority-in-interest of the holders of the outstanding Warrants by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the Company. The manner of determining
the Market Price of the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a determination as
to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4,
includes the Common Stock, par value $.01 per share, and any additional class of
stock of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $.01 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company at law or in equity. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to,
and shall not be made in the absence of compliance with, the conditions set
forth in Paragraph 7(f) hereof and to the applicable provisions of the
Securities Purchase Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything
to the contrary contained herein, the registration rights described in Paragraph
8 are assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of December 31, 1997, by and between the
Company and the other signatory thereto (the "Registration Rights Agreement").
(b) Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
reasonable expenses (other than legal expenses, if any, incurred by the holder
or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Paragraph 7. The Company
shall indemnify and reimburse the holder of this Warrant for all reasonable
costs (including legal fees) incurred by such holder in connection with the
successful enforcement of such holder's rights hereunder.
(e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that such
exercise, transfer, or exchange may be made without registration under said Act
and under applicable state securities or blue sky laws, (ii) that the transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof and makes all other
representations regarding the purchase of the "Securities" contained in the
Securities Purchase Agreement between the Company and such holder of even date
herewith as though such representations were fully set forth herein.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.
9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 000 Xxxxx Xxxxxx,
Xxxxxxxx Xxxx, XX 00000 Attention: Chief Executive Officer, or at such other
address as shall have been furnished to the holder of this Warrant by notice
from the Company. Any such notice, request, or other communication may be sent
by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF NEW YORK STATE WITHOUT REGARD
TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not registered pursuant to an effective registration statement under the
Securities Act at any time when registration is so required pursuant to the
Registration Rights Agreement or the Company has provided notice to the holder
stating that the Company will require cashless exercise of this Warrant, this
Warrant may be exercised by presentation and surrender of this Warrant to the
Company at its principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation of the number
of shares of Common Stock to be issued upon such exercise in accordance with the
terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in
lieu of paying the Exercise Price in cash, the holder shall surrender this
Warrant for that number of shares of Common Stock determined by multiplying the
number of Warrant Shares to which it would otherwise be entitled by a fraction,
the numerator of which shall be the difference between the then current Market
Price per share of the Common Stock and the Exercise Price, and the denominator
of which shall be the then current Market Price per share of Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Softnet Systems, Inc.
By:________________________
Name:
Title:
Dated as of December __, 1997
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To: Softnet Systems, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase 150,000 shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, in the case of cashless exercise, by surrender of securities
issued by the Company (including a portion of the Warrant) having a market value
(in the case of a portion of this Warrant, determined in accordance with Section
11(c) of the Warrant) equal to $_________. Please issue a certificate or
certificates for such shares of Common Stock in the name of and pay any cash for
any fractional share to:
Name: _____________________________
Signature: _____________________________
Address: _____________________________
_____________________________
Note: The above signature should correspond exactly with the name on
the face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth herein below, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
Name: _________________________
Signature: _________________________
Title of Signing Officer or Agent (if any):
Address: ___________________________
___________________________
Note: The above signature should correspond exactly with the name on the
face of the within Warrant.
