EXHIBIT C-2
FORM WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,-
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO AN EXEMPTION UNDER SUCH ACT.
W-__ Void after
December 10, 2004
WARRANT
of
TERAGLOBAL COMMUNCIATIONS CORP.
THIS CERTIFIES THAT, for value received, ___________________, together
with his, her or its successors and assigns (the "Holder") is entitled to
subscribe for and purchase, on the terms hereof, a number of shares of common
stock, par value $.001 ("Common Stock") of TeraGlobal Communications Corp., a
Delaware corporation (the "Company" or "TeraGlobal"), equal to [__] % of the
Company's then outstanding Common Stock at the time of vesting, including all of
the Company's outstanding Common Stock and common stock equivalents that are
convertible into and exercisable for Common Stock of TeraGlobal at the then
current market price or an exercise price not more than 20% above the then
current market price, subject to the following terms and conditions:
1. CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT. This
Warrant ("Warrant") is issued pursuant to that certain Convertible Promissory
Note and Warrant Purchase Agreement dated December 10, 2001 (the "Agreement") by
and among the Company and the Holder and will vest upon the earlier to occur of
(1) June 1, 2002, if the Company has not received at least $6.6 million in debt
and/or equity financing in a Next Qualified Financing as that term is defined in
the Agreement, (2) an event of default has occurred under any Note issued
pursuant to the Agreement, and (3) Xxxxxxx Xxxxx Ventures, Inc. terminates or
elects not to proceed with the marketing of the financing set forth in its term
sheet with the Company dated October 24, 2001.
2. EXERCISE OF WARRANT. The terms and conditions upon which this
Warrant may be exercised, and the Common Stock covered hereby may be purchased,
are as follows:
2.1 TERM. Subject to the terms hereof, this Warrant may be exercised
at any time, or from time to time, in whole or in part (the "Exercise Date"),
after the date hereof; provided,
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however, that in no event may this Warrant be exercised later than 5:00 p.m.
(Pacific Time) on the close of business on December 10, 2004.
2.2 EXERCISE PRICE. The Exercise Price per share for the Common
Stock shall be equal to $.001 per share ("Warrant Exercise Price"), subject to
adjustment as set forth below.
2.3 METHOD OF EXERCISE. The exercise of the purchase rights
evidenced by this Warrant shall be effected by (a) the surrender of the Warrant,
together with a duly executed copy of the form of subscription attached hereto
as EXHIBIT A, to the Company at its principal offices and (b) the delivery of
the purchase price by check payable to the Company's order or by wire transfer
of same day funds to the Company's account for the number of shares for which
the purchase rights hereunder are being exercised or any other form of
consideration approved by the Company's Board of Directors (the "Board"). Each
exercise of this Warrant shall be deemed to have been effected immediately prior
to the close of business on the day on which this Warrant shall have been
surrendered to the Company as provided herein or at such later date as may be
specified in the executed form of subscription, and at such time, the person or
persons in whose name or names any certificate or certificates for Common Stock
shall be issuable upon such exercise, as provided herein, shall be deemed to
have become the holder or holders of record thereof.
2.4 NET ISSUE EXERCISE. In lieu of exercising this Warrant by paying
the Exercise Price in cash or by check, Xxxxxx may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the Company's principal office together with the
Notice of Cashless Exercise attached hereto as EXHIBIT B duly completed and
executed in which event the Company shall issue to Holder a number of shares of
Common Stock computed using the following formula:
Z = (Y) (X-W)
---------
X
where:
Z = The number of Common Stock to be issued to Holder.
Y = The number of shares of Common Stock being
purchased under this Warrant.
X = The fair market value of one Common Stock
Share at the date of such calculation.
W = Exercise Price (as adjusted to the date of
such calculations).
For purposes of this Section, the fair market value of one Common Stock Share
shall be equal to the average closing bid price for the Common Stock for the
twenty (20) trading days prior to the date of exercise; or, if the Common Stock
is no longer traded on an exchange, the fair market value of such share as
determined in good faith by the Board.
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3. ADJUSTMENTS TO EXERCISE PRICE. The number of shares of Common Stock
issuable upon the exercise of this Warrant and the exercise price hereunder
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
3.1 SPLITS AND SUBDIVISIONS. If the Company should at any time or
from time to time fix a record date for the effectuation of a split or
subdivision of the outstanding Common Stock or the determination of the holders
of Common Stock entitled to receive a dividend or other distribution payable in
additional Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
Common Stock (hereinafter referred to as the "New Equity Equivalents") without
payment of any consideration by such holder for the additional Common Stock or
New Equity Equivalents, then, as of such record date (or the date of such
distribution, split or subdivision if no record date is fixed), the purchase
price shall be appropriately decreased and the number of Common Stock which this
Warrant is exercisable for, if any, shall be appropriately increased in
proportion to such increase of outstanding shares.
3.2 COMBINATION OF SHARES. If the number of Common Stock outstanding
at any time after the date hereof is decreased by a combination of the
outstanding Common Stock, the purchase price shall be appropriately increased
and the number of Common Stock which this Warrant is exercisable for, if any,
shall be appropriately decreased in proportion to such decrease in outstanding
shares.
3.3 ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the Company
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 3.1, then, in each
such case for the purpose of this Section 3.3, upon exercise of this Warrant the
Holder shall be entitled to a proportionate share of any such distribution as
though such Holder was the holder of the number of Common Stock into which this
Warrant may be exercised as of the record date fixed for the determination of
the holders of Common Stock entitled to receive such distribution.
3.4 RECLASSIFICATION OR REORGANIZATION. If the Common Stock (or any
shares of stock or other securities which may be) issuable upon the exercise of
this Warrant shall be changed into the same or different number of shares of any
class or classes of stock, whether by capital reorganization, reclassification
or otherwise (other than a subdivision or combination of shares or stock
dividend provided for in Sections 3.1, 3.2 and 3.3 above, then and in each such
event the Holder shall be entitled to receive upon the exercise of this Warrant
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, to which
a holder of the number of Common Stock (or any shares of stock or other
securities which may be) issuable upon the exercise of this Warrant would have
received if this Warrant had been exercised immediately prior to such
reorganization, reclassification or other change, all subject to further
adjustment as provided herein.
3.5 ACQUISITION OR CONSOLIDATION. If TeraGlobal effects a
consolidation or merger with another corporation, or the sale of all or
substantially all of its assets or other transaction in such a way that holders
of Common Stock shall be entitled to receive stock, securities, or other assets
or property (a "Transaction"), then, as a condition of such Transaction, lawful
and
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adequate provisions shall be made by the Company whereby the Holder hereof
shall thereafter have the right to purchase and receive (in lieu of the Shares
of the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby.
In the event of any Transaction, appropriate provision shall be made by the
Company with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Stock Purchase Price and of the number of Shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter
be applicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
3.6 ANTIDILUTION. In the event that TeraGlobal issues or grants any
warrants or other convertible security pursuant to which Common Stock of
TeraGlobal may be acquired at a price less than the Warrant Exercise Price, the
Warrant Exercise Price of all Warrants issued or to be issued in connection with
this financing will automatically be reduced to such lower exercise price (this
is intended to be a "full ratchet" adjustment). Such adjustment shall be made
successively whenever such an issuance is made.
3.7 NOTICE OF ADJUSTMENTS AND RECORD DATES. The Company shall
promptly notify the Holder in writing of each adjustment or readjustment of the
exercise price hereunder and the number of shares of Common Stock issuable upon
the exercise of this Warrant. Such notice shall state the adjustment or
readjustment and show in reasonable detail the facts on which that adjustment or
readjustment is based. In the event of any taking by the Company of a record of
the holders of Common Stock for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, the Company
shall notify the Holder in writing of such record date at least twenty (20) days
prior to the date specified therein.
3.8 NO IMPAIRMENT. The Company shall not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in the
carrying out of all the provisions of this Warrant.
4. REPLACEMENT OF THE WARRANT. On receipt by the Company 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 of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of the Warrant, the Company at its
expense shall execute and deliver to the Holder, in lieu thereof, a new Warrant
of like tenor.
5. INVESTMENT INTENT. Unless a current registration statement under the
Securities Act of 1933, as amended, shall be in effect with respect to the
securities to be issued upon exercise of this Warrant, the Holder, by accepting
this Warrant, covenants and agrees that, at the time of exercise hereof, and at
the time of any proposed transfer of any securities acquired upon exercise
hereof, the Holder shall deliver to the Company a written statement that the
securities acquired by the Holder upon exercise hereof are for the account of
the Holder for investment and are not acquired with a view to, or for sale in
connection with, any distribution thereof (or any portion
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thereof) and are being acquired with no present intention (at any such time) of
offering or distributing such securities (or any portion thereof).
6. NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Warrant does not
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Company. No provisions hereof, in the absence of affirmative action by
the Holder to purchase Common Stock, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder as a
stockholder of the Company.
7. MISCELLANEOUS.
7.1 TRANSFER OF WARRANT. The rights represented by this Warrant are
transferable only on the books of the Company at its corporate office in San
Diego, California, by the Holder upon surrender of this Warrant properly
endorsed.
7.2 TITLES AND SUBTITLES. The titles and subtitles used in this
Warrant are for convenience only and are not to be considered in construing or
interpreting this Warrant.
7.3 NOTICES. Any notice required or permitted under this Warrant
shall be given in writing and in accordance with Section 7.3 of the Agreement
(for purposes of which, the term "Investors" shall mean Holder hereunder),
except as otherwise expressly provided in this Warrant.
7.4 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
7.5 AMENDMENTS AND WAIVERS. This Warrant is issued by the Company
pursuant to the Agreement. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), in accordance
with Section 4.5 of the Agreement. Any amendment or waiver effected in
accordance with this Section 7.5 shall be binding upon the Holder of this
Warrant (and of any securities into which this Warrant is convertible), each
future holder of all such securities, and the Company.
7.6 SEVERABILITY. If one or more provisions of this Warrant are held
to be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.7 GOVERNING LAW. This Warrant shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to its conflicts of laws principles.
7.8 REGISTRATION RIGHTS. The Common Stock issuable upon the exercise
of this Warrant constitutes "Registrable Securities" under that certain
Registration Rights Agreement dated December 10, 2001 between the Company and
certain investors and, accordingly, has the benefit of registration rights
pursuant to that Agreement.
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7.9 RESERVATION AND AUTHORIZATION OF COMMON STOCK. The Company shall
at all times reserve a sufficient number of shares of common stock for issuance
upon exercise of this Warrant, which stock, upon issuance in accordance with the
terms of this Warrant, will be duly authorized, validly issued, fully paid and
non-assessable.
7.10 BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant (and the Common Stock issuable upon conversion thereof)
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.
Date: December 10, 2001 TERAGLOBAL COMMUNICATIONS CORP.
a Delaware corporation
By: _________________________________
Xxxxxx X. Xxxxxxx,
Chief Executive Officer
ACKNOWLEDGED AND AGREED:
______________________________________
(Print Name of Holder)
______________________________________
(Signature of Holder)
______________________________________
(Title of Holder Not an Individual)
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EXHIBIT A
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
To: TERAGLOBAL COMMUNICATIONS CORP.
The undersigned, the holder of the Warrant attached hereto, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, __________* shares of Common Stock of
TeraGlobal Communications Corp., and herewith makes payment of $__________ and
requests that the certificates for such shares be issued in the name of, and
delivered to ___________________________________________, whose address is
___________________________________________________________________, and whose
social security number/taxpayer identification number is _________________.
Dated: _____________________________
_____________________________________________________
(Signature must conform in all respects to name of the
Holder as specified on the face of the Warrant)
_____________________________________________________
(Print Name)
Address: _________________________________________________________
_________________________________________________________
_________________________________________________________
* Insert here the number of shares as to which the Warrant is being exercised.
Exhibit A-1
EXHIBIT B
NOTICE OF CASHLESS EXERCISE
To: TERAGLOBAL COMMUNICATIONS CORP.
(1) The undersigned hereby elects to acquire in a cashless exercise
______________ shares of Common Stock (as defined in the attached Warrant) of
TeraGlobal Communications Corp. pursuant to the terms of Section 2.7 of the
attached Warrant.
(2) Please issue a certificate or certificates representing such Common
Stock in the name of the undersigned or in such other name as is specified
below:
__________________________________________
By: ______________________________________
Name: ____________________________________
Exhibit B-1
