EXHIBIT 10.5
WORLDQUEST NETWORKS, INC.
STOCK PURCHASE WARRANT
granted to
INTERVOICE, INC.
June 10, 1998
TABLE OF CONTENTS
Page
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1. Manner of Exercise; Issuance of Certificates; Payment for Shares........1
2. Period of Exercise......................................................2
3. Certain Agreements of the Company.......................................2
(a) Shares to be Fully Paid..........................................2
(b) Reservation of Shares............................................2
(c) Certain Actions Prohibited.......................................2
(d) Registration.....................................................3
4. Antidilution Provisions.................................................3
(a) Stock Dividends; Subdivisions and Combinations...................3
(b) Issuance of Rights, Options, and Warrants........................4
(c) Extraordinary Dividends and Distributions........................5
(d) Issuance of Common Stock.........................................5
(e) Computation of Market Price......................................6
(f) Record Date Adjustments..........................................6
(g) Minimum Adjustment of Exercise Price.............................7
(h) Reorganization, Reclassification,
Consolidation, Merger, or Sale...................................7
(i) No Fractional Shares.............................................8
(j) Notice of Adjustment.............................................8
(k) Other Notices....................................................8
(l) Certain Events...................................................9
(m) Nonconvertible Preferred Stock...................................9
5. Registration Rights.....................................................9
(a) Right to Participate in Registrations............................9
(b) Registration Procedures.........................................10
(c) Required Information............................................10
(d) Expenses of Registration........................................11
(e) Indemnification.................................................11
(f) Lock-Up.........................................................11
6. Issue Tax..............................................................11
7. Availability of Information............................................11
8. No Rights or Liabilities as a Shareholder..............................12
ii
9. Transfer, Exchange, and Replacement of Warrant.........................12
(a) Warrant Transferable............................................12
(b) Warrant Exchangeable for Different Denominations................12
(c) Replacement of Warrant..........................................12
(d) Cancellation; Payment of Expenses...............................12
(e) Register........................................................13
(f) Exercise or Transfer Without Registration.......................13
10. Notices................................................................13
11. Possible Amendment of Equipment Lease..................................13
12. GOVERNING LAW..........................................................14
13. Miscellaneous..........................................................14
(a) Amendments......................................................14
(b) Descriptive Headings............................................14
(c) Successors and Assigns..........................................14
iii
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES
OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR
EXEMPTIONS FROM SUCH REGISTRATION. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT UPON THE CONDITIONS SPECIFIED IN
THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH.
No. W-001 Right to Purchase 159,474 Shares
STOCK PURCHASE WARRANT
This certifies that, for value received, InterVoice, Inc., a Texas
corporation, or registered assigns, is entitled to purchase from WorldQuest
Networks, Inc., a Texas corporation (the "Company"), at any time or from time to
time during the period specified in Paragraph 2 hereof, One Hundred Fifty-Nine
Thousand Four Hundred Seventy-Four (159,474) fully paid and nonassessable shares
of the Company's Common Stock, par value $.10 per share (the "Common Stock"), at
an exercise price per share of Three and 33/100 Dollars ($3.33) (the "Exercise
Price"). The term "Warrant Shares", as used herein, refers to the shares of
Common Stock purchasable hereunder. On the date of issuance of the initial
Warrant (as herein defined), the Warrant Shares constituted 5% of the issued and
outstanding Common Stock of the Company on a fully diluted basis after taking
into account the exercise or conversion of all outstanding options, rights,
warrants, convertible securities and other instruments of any nature whatsoever
convertible into, or exchangeable for, Common Stock. The Warrant Shares and
the Exercise Price are subject to adjustment as provided in Paragraph 4 hereof.
This Stock Purchase Warrant was originally issued in connection with the initial
holder's execution of the Equipment Lease dated June 10, 1998 (the "Equipment
Lease") with the Company under which such holder agreed to lease to the Company
equipment and license software for 400 Ports with ISDN primary rate network
connectivity. The term "Warrants", as used herein, shall mean this Stock
Purchase Warrant and all other Stock Purchase Warrants issued in connection with
any transfer, exchange, or replacement thereof.
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 (but not as to a fractional Warrant Share), subject
to a maximum of five exercises. Any exercise of this Warrant must involve an
aggregate Exercise Price equal to the lesser of (i) $100,000 or (ii) the
mathematical product of $3.33 multiplied by the then-remaining number of Warrant
Shares purchasable hereunder. The holder hereof may exercise this Warrant by
the surrender of this Warrant, together with a completed Exercise Agreement in
the form attached hereto, to the Company
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during normal business hours on any business day at the Company's principal
office in Dallas, Texas (or such other office or agency of the Company as it may
designate by notice to the holder hereof), and upon payment to the Company in
cash or by certified or official bank check of the Exercise Price for the
Warrant Shares specified in said Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or its 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
delivered, and payment made for such shares as aforesaid. Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in said Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding seven business days, after this Warrant
shall have been so exercised. 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 said holder or such other name as shall be designated by said
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 said certificates, deliver to said holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised. The Company shall pay all taxes and other expenses and charges
payable in connection with the preparation, execution, and delivery of stock
certificates (and any new Warrants) pursuant to this Paragraph 1 except that, in
case such stock certificates shall be registered in a name or names other than
the holder of this Warrant, funds sufficient to pay all stock transfer taxes
which shall be payable in connection with the execution and delivery of such
stock certificates shall be paid by the holder hereof to the Company at the time
of the delivery of such stock certificates by the Company as mentioned above.
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time after June 10, 1998, and before 5:00 p.m., local time in Dallas,
Texas, on June 10, 2003.
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 issuance,
be validly issued, fully paid, and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the period within which this
Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue upon exercise of this Warrant, a
sufficient number of shares of Common Stock to provide for the exercise of
this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment
of its charter 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, consistent with the tenor and purpose of this
Warrant. Without limiting
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the generality of the foregoing, (i) the Company will not increase the par
value of the shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, (ii) before taking any
action which would cause an adjustment reducing the Exercise Price below
the then par value of the shares of Common Stock so receivable, the Company
will take all such corporate action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Exercise Price upon
the exercise of this Warrant and (iii) the Company will not take any action
which results in any adjustment of the Exercise Price if the total number
of shares of Common Stock issuable after the action upon the exercise of
this Warrant would exceed the total number of shares of Common Stock then
authorized by the Company's charter and available for the purpose of issue
upon such exercise.
(d) Registration. If the issuance of any Warrant Shares required to
be reserved for purposes of exercise of this Warrant requires registration
with or approval of any governmental authority under any federal or state
law (other than any registration under the Securities Act of 1933, as
amended (the "Securities Act"), or under applicable state securities or
blue sky laws, which registration is subject to Paragraph 5 hereof) or
listing on any national securities exchange, before such shares may be
issued upon exercise of this Warrant, the Company will, at its expense, use
its best efforts to cause such shares to be duly registered or approved, or
listed on the relevant national securities exchange, as the case may be, at
such time, so that such shares may be issued in accordance with the terms
hereof.
4. Antidilution Provisions. The Exercise Price shall be subject to
adjustment from time to time as provided in this Paragraph 4. Upon each
adjustment of the Exercise Price, the holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
largest number of Warrant Shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of this Paragraph 4, the term "Capital Stock", as used herein, includes
the Common Stock and any additional class of stock of the Company which may be
authorized in the future by an amendment to the Company's charter, provided that
the shares purchasable pursuant to this Warrant shall include only shares of
Common Stock, or shares resulting from any subdivision or combination of the
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(h)
hereof, the stock or other securities or property provided for in said
Paragraph.
(a) Stock Dividends; Subdivisions and Combinations. In case at any time
the Company shall (i) pay a dividend or make a distribution on Common Stock in
Common Stock, (ii) subdivide the outstanding shares of Common Stock into a
greater number of shares, or (iii) combine the outstanding shares of Common
Stock into a smaller number of shares, the Exercise Price in effect immediately
prior thereto shall be adjusted proportionately so that the adjusted Exercise
Price shall bear the same relation to the Exercise Price in effect immediately
prior to such event as the total number of shares of Common Stock outstanding
immediately prior to such event shall bear to the total number of shares of
Common Stock outstanding immediately after such event. An adjustment made
pursuant to this Paragraph 4(a) shall become effective immediately after the
record date in the
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case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision or combination.
(b) Issuance of Rights, Options, and Warrants. In case at any time the
Company shall issue any rights, options, or warrants (such rights, options, or
warrants being herein called "Options") entitling any person to subscribe for or
purchase Common Stock at a price per share less than the Exercise Price in
effect on the date of issuance of the applicable Options, the following two
adjustments shall be made:
(i) Exercise Price. The Exercise Price shall be adjusted to equal
the mathematical product of (i) the Exercise Price in effect
immediately prior to the issuance of the applicable Options multiplied
by (ii) a fraction of which [1] the numerator is the total number of
shares of Common Stock outstanding on such issuance date plus the
number of shares of Common Stock which the aggregate consideration paid
or payable to the Company in connection with the issuance and/or
exercise of the Options would purchase at the Exercise Price and [2]
the denominator is the total number of shares of Common Stock
outstanding on such issuance date plus the maximum number of shares of
Common Stock covered by the Options.
(ii) Warrant Shares. The number of Warrant Shares shall be
adjusted to equal the mathematical product of (i) number of Warrant
Shares issuable on the exercise hereof immediately prior to the
issuance of the applicable Options multiplied by (ii) a fraction of
which [1] the numerator is the total number of shares of Common Stock
outstanding on such issuance date plus the maximum number of shares of
Common Stock covered by the Options and [2] the denominator is the
total number of shares of Common Stock outstanding on such issuance
date plus the number of shares of Common Stock which the aggregate
consideration paid or payable to the Company in connection with the
issuance and/or exercise of the Options would purchase at the Exercise
Price.
In the case of an issuance by the Company of securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable securities being
herein called "Convertible Securities"), for purposes of this Paragraph 4(b),
such issuance shall be deemed to be an issuance of Options to such holders
entitling them to subscribe for or purchase Common Stock at the Convertible
Securities Price (as herein defined). The Convertible Securities Price shall be
determined by dividing [1] the minimum aggregate amount of consideration payable
to the Company upon the issuance of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable to the Company upon the conversion or exchange
thereof, by [2] the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of such Convertible Securities.
(c) Extraordinary Dividends and Distributions. In case at any time the
Company shall pay a dividend or make a distribution to all holders of Capital
Stock, as such, of shares of its stock (other than Capital Stock), evidences of
its indebtedness, assets (excluding dividends or distributions payable in cash
out of earnings or earned surplus), or rights, options, or warrants to subscribe
for or purchase
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such shares, evidences of indebtedness, or assets (excluding the rights,
options, and warrants referred to in Paragraph 4(b) hereof), then in each such
case the Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to the
record date mentioned below by a fraction, the numerator of which shall be the
total number of shares of Capital Stock outstanding on such record date
multiplied by the market price per share of Capital Stock (determined as
provided in Paragraph 4(e) hereof) on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company) as
of such record date of such shares of stock, evidences of indebtedness, assets,
or rights, options, or warrants so paid or distributed, and the denominator of
which shall be the total number of shares of Capital Stock outstanding on such
record date multiplied by the market price per share of Capital Stock
(determined as provided in Paragraph 4(e) hereof) on such record date. Such
adjustment shall be made whenever such dividend is paid or such distribution is
made and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend or distribution.
(d) Issuance of Common Stock. The following two adjustments shall be made
if and whenever the Company shall sell any shares of Common Stock (the "Dilutive
Common Stock") without consideration or for a consideration per share less than
the Exercise Price in effect immediately prior to the date of issuance or sale
of the Dilutive Common Stock.
(i) Exercise Price. The Exercise Price shall be adjusted to equal
the mathematical product of (i) the Exercise Price in effect
immediately prior to the issuance or sale of the Dilutive Common Stock
multiplied by (ii) a fraction of which [1] the numerator is the total
number of shares of Common Stock outstanding on the date of issuance or
sale plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the Dilutive Common Stock
would purchase at the Exercise Price and [2] the denominator is the
total number of shares of Common Stock outstanding on such date of
issuance or sale plus the number of shares of Dilutive Common Stock.
(ii) Warrant Shares. The number of Warrant Shares shall be
adjusted to equal the mathematical product of (i) number of Warrant
Shares issuable on the exercise hereof immediately prior to the
issuance or sale of the Dilutive Common Stock multiplied by (ii) a
fraction of which [1] the numerator is the total number of shares of
Common Stock outstanding on the date of issuance or sale of the
Dilutive Common Stock plus the number of shares of Dilutive Common
Stock and [2] the denominator is the total number of shares of Common
Stock outstanding on such date of issuance or sale plus the number of
shares of Common Stock which the aggregate consideration received by
the Company for the Dilutive Common Stock would purchase at the
Exercise Price.
(e) Computation of Market Price. For the purpose of any computation under
Paragraph 4(c) hereof, the market price of the security in question on any day
shall be deemed to be the average of the last reported sale prices for the
security for the 20 consecutive Trading Days (as defined below)
5
commencing 20 Trading Days before the day in question. The last reported sale
price for each day shall be (i) the last reported sale price of the security on
the Nasdaq National Market, the Nasdaq Small Cap Issuer Market or any similar
system of automated dissemination of quotations of securities prices then in
common use, if so quoted, or (ii) if not quoted as described in clause (i)
above, the mean between the high bid and low asked quotations for the security
as reported by the National Quotation Bureau, Inc. if at least two securities
dealers have inserted both bid and asked quotations for such security on at
least 10 of such 20 consecutive Trading Days, or (iii) if the security is listed
or admitted for trading on any national securities exchange, the last sale
price, or the closing bid price if no sale occurred, of such class of security
on the principal securities exchange on which such class of security is listed
or admitted to trading. If the security is quoted on a national securities or
central market system, in lieu of a market or quotation system described above,
the last reported sale price shall be determined in the manner set forth in
clause (ii) of the preceding sentence if bid and asked quotations are reported
but actual transactions are not, and in the manner set forth in clause (iii) of
the preceding sentence if actual transactions are reported. If none of the
conditions set forth above is met, the last reported sale price of the security
on any day or the average of such last reported sale prices for any period shall
be the fair market value of such security as determined by a member firm of the
New York Stock Exchange mutually selected by the Company and the holder of this
Warrant. If the fair market value is determined pursuant to the immediately
preceding sentence, such value shall continue to be used by the Company and the
holder for all purposes of this Paragraph 4(e) for the immediately succeeding
90-day period; provided, however, the use of such value during such 90-day
period shall immediately cease if either (i) the market price of such security
can be determined in the manner contemplated by the first three sentences of
this Paragraph 4(e) or (ii) the Company is unable to provide the holder with an
officer's certificate to the effect that there has been no change within the
elapsed portion of such 90-day period in the condition of the Company, financial
or otherwise, that would materially affect the market value of the applicable
security. The term "Trading Days", as used herein, means (i) if the security is
quoted on the Nasdaq National Market or any similar system of automated
dissemination of quotations of securities prices, days on which trades may be
made on such system or (ii) if the security is listed or admitted for trading on
any national securities exchange, days on which such national securities
exchange is open for business.
(f) Record Date Adjustments. In any case in which this Paragraph 4
requires that a downward adjustment of the Exercise Price shall become effective
immediately after a record date for an event, the Company may defer until the
occurrence of such event (A) issuing to the holder of this Warrant exercised
after such record date and before the occurrence of such event the additional
Warrant Shares issuable upon such exercise by reason of the adjustment required
by such event over and above the Warrant Shares issuable upon such exercise
before giving effect to such adjustment and (B) paying to such holder any amount
in cash in lieu of a fractional share pursuant to Paragraph 4(i) hereof.
(g) Minimum Adjustment of Exercise Price. No adjustment of the Exercise
Price shall be made in an amount less than 0.5% 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 0.5% of such
Exercise Price.
(h) Reorganization, Reclassification, Consolidation, Merger, or Sale. If
any capital
6
reorganization of the Company, or any reclassification of the Capital Stock, or
any consolidation or merger of the Company with or into another corporation or
entity, or any sale of all or substantially all the assets of the Company, shall
be effected in such a way that the holders of Common Stock (or any other
securities of the Company then issuable upon the exercise of this Warrant) shall
be entitled to receive stock or other securities or property (including cash)
with respect to or in exchange for Common Stock (or such other securities),
then, as a condition of such reorganization, reclassification, consolidation,
merger, or sale, lawful and adequate provision shall be made whereby the holder
of this Warrant shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant, and in lieu
of the shares of Common Stock (or such other securities) immediately theretofore
purchasable and receivable upon the exercise hereof, such stock or other
securities or property (including cash) as may be issuable or payable with
respect to or in exchange for a number of outstanding shares of Common Stock (or
such other securities) equal to the number of shares of Common Stock (or such
other securities) immediately theretofore purchasable and receivable upon the
exercise of this Warrant, had such reorganization, reclassification,
consolidation, merger, or sale not taken place. In any such case appropriate
provision shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including, without
limitation, the provisions for adjustments of the Exercise Price and of the
number of Warrant Shares purchasable upon exercise hereof) shall thereafter be
applicable, as nearly as reasonably may be, in relation to the stock or other
securities or property thereafter deliverable upon the exercise hereof
(including an immediate adjustment of the Exercise Price if by reason of or in
connection with such consolidation, merger, or sale any securities are issued or
event occurs which would, under the terms hereof, require an adjustment of the
Exercise Price). In the event of a consolidation or merger of the Company with
or into another corporation or entity as a result of which a greater or lesser
number of shares of common stock of the surviving corporation or entity are
issuable to holders of Capital Stock in respect of the number of shares of
Capital Stock outstanding immediately prior to such consolidation or merger,
then the Exercise Price in effect immediately prior to such consolidation or
merger shall be adjusted in the same manner as though there were a subdivision
or combination of the outstanding shares of Capital Stock. The Company shall not
effect any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation or entity (if other than
the Company) resulting from such consolidation or merger or the corporation or
entity purchasing such assets and any other corporation or entity the shares of
stock or other securities or property of which are receivable thereupon by the
holder of this Warrant shall expressly assume, by written instrument executed
and delivered (and satisfactory in form) to the holder of this Warrant, the
obligation to deliver to such holder such stock or other securities or property
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase.
(i) No Fractional Shares. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company 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 current market value of a share
of Common Stock, which current market value shall be the last reported sale
price (determined as provided in Paragraph 4(e) hereof) on the Trading Day
immediately preceding the date of the exercise as reasonably determined by the
Company.
(j) 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
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to the holder of this Warrant, which notice shall state the Exercise Price
resulting from such adjustment and the increase or decrease, if any, in the
number of 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.
(k) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Capital
Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out
of earnings or earned surplus) to the holders of the Capital Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Capital 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 Capital 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 Capital Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Capital 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 Capital Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Capital
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 20 days prior to the record date or the date on which the Company's books
are closed in respect thereto.
(l) Certain Events. If any event occurs as to which, in the good faith
judgment of the Board of Directors of the Company, the other provisions of this
Paragraph 4 are not strictly applicable or if strictly applicable would not
fairly protect the exercise rights of the holder of this Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company and the holder of this Warrant shall, at the Company's
expense, appoint a mutually agreed firm of independent public accountants of
recognized national standing which shall give their opinion upon the adjustment,
if any, on a basis consistent with such essential intent and principles,
necessary to preserve, without dilution, the rights of the holder of this
Warrant. Upon receipt of such opinion, the Board of Directors of the Company
shall forthwith make the adjustments
8
described therein; provided, that no such adjustment shall have the effect of
increasing the Exercise Price as otherwise determined pursuant to this Paragraph
4.
(m) Nonconvertible Preferred Stock. The Company will not issue any
nonconvertible preferred stock (i.e., preferred stock that is not convertible
into Common Stock) at a price per share less than the Exercise Price without the
prior written consent of the holder of this Warrant, which consent will not be
unreasonably withheld. The Company will not issue any other class or series of
Common Stock.
5. Registration Rights.
(a) Right to Participate in Registrations. If at any time the Company
proposes to register shares of Capital Stock (as defined in Paragraph 4 hereof)
under the Securities Act on Form S-1, S-2, or S-3 (or any form which replaces or
is substantially similar to such form), the Company shall each such time give
notice of such proposed registration to the holder of this Warrant, if this
Warrant has not yet expired, and to all holders of Warrant Shares. Subject to
the terms and provisions of this Paragraph 5(a), upon the request of any such
holder made within 20 days after the giving of such notice by the Company, the
Company shall cause all Warrant Shares that have been acquired by such holder
pursuant to the exercise of this Warrant, and all Warrant Shares that will be
acquired by such holder pursuant to the exercise of this Warrant not later than
the fifth day prior to the filing of the registration statement under the
Securities Act, which shares such holder shall have requested to be included in
the proposed registration (the "Registrable Shares"), to be included as "piggy-
back" shares in such registration (the "Piggyback Registration") to the extent
requisite to permit the sale or other disposition by such holder of such
Registrable Shares. In the event the offering to be conducted pursuant to the
proposed registration is to be an underwritten public offering, the registration
rights provided in this Paragraph 5(a) shall be subject to the approval of the
managing underwriter or underwriters of such offering, who shall determine the
number of Registrable Shares, if any, that may be included in such registration
without adversely affecting such offering; provided, however, any such reduction
by the underwriter or underwriters in the number of shares of Common Stock
included in such offering shall be applied and borne pro rata among all
participants in such offering other than the Company.
(b) Registration Procedures. If and whenever the Company is required by
the provisions of Paragraph 5 (a) to cause Registrable Shares to be included in
the registration of securities of the Company under the Securities Act, the
Company will, as expeditiously as possible:
(A) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement")
covering such Registrable Shares and use its best efforts to cause the
Registration Statement to become effective and to remain effective for so
long as may reasonably be necessary to complete the sale or other
disposition of such Registrable Shares, provided that the Company shall not
in any event be required to use its best efforts to maintain the
effectiveness of the Registration Statement for a period in excess of 180
days;
(B) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus contained
therein as may be necessary to keep the
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Registration Statement effective, and comply with the provisions of the
Securities Act, with respect to the sale or other disposition of such
Registrable Shares;
(C) furnish to each holder of such Registrable Shares such numbers of
copies of the Registration Statement, the prospectus contained therein
(including each preliminary prospectus), and each amendment and supplement
to the Registration Statement and such prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such
holder may reasonably request in order to facilitate the sale or other
disposition of such Registrable Shares;
(D) use reasonable efforts to register or qualify such Registrable
Shares for sale under the securities or blue sky laws of such jurisdictions
as the holders thereof may request, and do any and all other acts and
things that may be necessary under such securities or blue sky laws to
enable the holders of such Registrable Shares to consummate the sale or
other disposition of such Registrable Shares in such jurisdictions,
provided that the Company shall not in any event be required to keep any
such registration or qualification in effect after the expiration of the
period during which the Company maintains the effectiveness of the
Registration Statement and shall not for any such purpose be required to
qualify to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified or to subject itself to taxation in any such
jurisdiction; and
(E) before filing the Registration Statement, any prospectus to be used
in connection with the offering to be conducted pursuant to such
registration, or any amendments or supplements to the Registration
Statement or such prospectus with the Commission, furnish counsel to the
holders of such Registrable Shares with copies of all such documents
proposed to be filed, which shall be subject to the reasonable approval of
such counsel.
(c) Required Information. The Company shall not be required to include any
Registrable Shares in a proposed registration of its securities under the
Securities Act unless and until (i) the holder of such Registrable Shares
furnishes to the Company such information regarding such holder and such
Registrable Shares and the intended method of disposition of such Registrable
Shares as the Company shall reasonably request in order to satisfy the
requirements applicable to such registration, and (ii) in the event of a
Piggyback Registration that is part of an underwritten public offering, such
Xxxxxx agrees to the terms of the underwriting agreed to between the Company and
the underwriter or underwriters of such offering and executes all documents
reasonably required to effect such offering.
(d) Expenses of Registration. In the event of the inclusion pursuant to
Paragraph 5(a) of Registrable Shares in a Piggyback Registration by the Company,
each holder of such Registrable Shares shall pay any brokerage and underwriting
discounts and commissions payable in respect of Registrable Shares sold on such
holder's behalf and all fees and expenses of any attorneys and accountants
employed by such holder, and the Company shall pay any and all other fees and
expenses of any nature whatsoever incurred in connection with such Piggyback
Registration.
(e) Indemnification. In connection with any registration of Registrable
Shares pursuant to the provisions of this Paragraph 5, the Company shall
indemnify and hold harmless the holder of such
10
Registrable Shares to the extent that companies generally indemnify and hold
harmless underwriters in connection with public offerings under the Securities
Act, and such holder shall indemnify and hold harmless the Company to the extent
that selling shareholders generally indemnify and hold harmless issuers of
securities in connection with public offerings under the Securities Act with
respect to the written information provided by such holder for use by the
Company in the preparation of the Registration Statement.
(f) Lock-Up. In connection with any registration of Registrable Shares
pursuant to the provisions of this Paragraph 5, the holder of such Registrable
Shares shall, if requested by the underwriter or underwriters of such offering,
execute a reasonable lock-up agreement in customary form pursuant to which such
holder agrees not to sell any Common Stock (other than the Registrable Shares
covered by the Registration Statement) during a period of time not exceeding 120
days following the effective date of the Registration Statement.
6. 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 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.
7. Availability of Information. The Company will cooperate with the
holder of this Warrant and each holder of any Warrant Shares in supplying such
information as may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of this Warrant or any Warrant Shares. The Company will deliver to the
holder of this Warrant, promptly upon their becoming available, copies of all
financial statements, reports, notices, and proxy statements sent or made
available generally by the Company to its shareholders, and copies of all
regular and periodic reports, if any, and all registration statements and
prospectuses, if any, filed by the Company with any securities exchange or with
the Commission.
8. 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. 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.
9. Transfer, Exchange, and Replacement of Warrant.
(a) Warrant Transferable. Subject to the prior written consent of the
Company (which consent shall not be unreasonably withheld), this Warrant is
transferable, in whole or in part, to an aggregate of not more than three
transferees. The transfer of this Warrant and all rights hereunder, in whole or
in part, is registrable at the office or agency of the Company referred to in
Paragraph 9(e) hereof by the holder hereof in person or by such xxxxxx's duly
authorized attorney, upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and
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that the holder hereof, when this Warrant shall have been so endorsed, may be
treated by the Company and all other persons dealing with this Warrant as the
absolute owner and holder hereof for any purpose and as the person entitled to
exercise the rights represented by this Warrant and to the registration of
transfer hereof on the books of the Company; but until due presentment for
registration of transfer on such books 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.
(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 9(e) hereof, 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 said 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 9, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 9.
(e) Register. The Company shall maintain, at its principal office in
Dallas, Texas (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. Anything in this Warrant to
the contrary notwithstanding, if, at the time of the surrender of this Warrant
in connection with any exercise, transfer, or exchange of this Warrant, this
Warrant shall not be registered under 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, that (i) the holder or transferee
of this Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, 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 and (ii) the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company. 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.
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10. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant or to
the holder of shares acquired upon exercise of this Warrant shall be in writing,
and shall be personally delivered by overnight delivery service, or shall be
sent by certified or registered mail, 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, postage prepaid and addressed, to the office of the Company at 00000
Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, Attention: President, or at such
other address as shall have been furnished to the holder of this Warrant or to
the holder of shares acquired upon exercise of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent by
telegram or telex, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail as provided above.
All notices, requests, and other communications shall be deemed to have been
given either at the time of the delivery thereof to (or the receipt by, in the
case of a telegram or telex) the person entitled to receive such notice at the
address of such person for purposes of this Paragraph 10 or, if mailed, at the
completion of the third full day following the time of such mailing thereof to
such address, as the case may be.
11. Possible Amendment of Equipment Lease. The Company and the initial
holder will amend the Equipment Lease to delete clause (a) from the first
sentence of Section 11 of the Equipment Lease, if at any time during the three-
year initial term of the Equipment Lease the value of the Warrant Shares equals
or exceeds $1.5 million based on (i) consideration paid to Warrant holders
pursuant to an acquisition of such Warrant Shares in connection with an
acquisition of substantially all of the Capital Stock and/or assets of the
Company, by merger or otherwise, or (ii) the market price of the Warrant Shares,
determined in accordance with Section 4(e), on any recognized national stock
exchange (i.e., the New York Stock Exchange and/or the American Stock Exchange),
or the Nasdaq National Market or the Nasdaq Small Cap Issuer Market.
12. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
13. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be changed,
waived, discharged, or terminated orally, but only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought.
(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) Successors and Assigns. This Warrant shall be binding upon any entity
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all the Company's assets.
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In witness whereof, the Company has caused this Warrant to be signed by its
duly authorized officer under its corporate seal, attested by its duly
authorized officer, as of the 10/th/ day of June, 1998.
Worldquest Networks, Inc.
By: /S/ XXXX XXXXX
------------------------------
Name:
Title:
[Corporate Seal]
Attest:
----------------------------
Name:
-----------------------
Title:
----------------------
14
FORM OF EXERCISE AGREEMENT
Dated:
-------------------------
To:
-----------------------
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase __________ 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 $____________. 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:
---------------------
Title of Signing Officer
or Agent (if any):
Note: The above signature should correspond exactly with the name on the
face of the within Warrant or with the name of the assignee
appearing in the assignment form.
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.
15
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 hereinbelow, 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.
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