Exhibit 4.3
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES LAW. THE COMPANY WILL NOT TRANSFER THIS WARRANT, OR
ANY SHARES OF COMMON SHARES ISSUABLE UPON EXERCISE, UNLESS (i) THERE IS AN
EFFECTIVE REGISTRATION COVERING THIS WARRANT OR SHARES UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES AN OPINION FROM AN
ATTORNEY, REASONABLY ACCEPTABLE TO THE COMPANY, STATING THAT THE PROPOSED
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND UNDER ALL APPLICABLE
STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144
PROMULGATED UNDER THE ACT.
For the Purchase of
200,000 shares of
Common Stock
No. N006
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
WATCHDOG PATROLS, INC.
(A New York corporation)
FOR VALUE RECEIVED, Watchdog Patrols, Inc. ("Company"), hereby certifies
that Xxxxxx X. Xxxxxxxx, Xx. residing at 0000 X. Xxxxxxxx Xx. Xx. 0, Xxxxx, XX
00000 ("Registered Holder"), is entitled, subject to the terms set forth below,
to purchase from the Company, $1.63 shares of Common Stock, $.0033 par value, of
the Company ("Common Stock"), at a purchase price equal $1.63. The number of
shares of Common Stock purchasable upon exercise of this Warrant, and the
purchase price per share, each as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant Shares"
and the "Exercise Price," respectively.
1. Exercise.
1.1 Procedure for Cash Exercise. This Warrant may be exercised by the
Registered Holder, in whole or in part, by the surrender of this Warrant (with
the Notice of Exercise Form attached hereto as Exhibit I duly executed by such
Registered Holder) at the principal office of the Company, or at such other
office or agency as the Company may designate,
1.2 accompanied by payment in full, in lawful money of the United States,
of an amount equal to the then applicable Exercise Price multiplied by the
number of Warrant Shares then being purchased upon such exercise.
1.3 Procedure for Cashless Exercise. In lieu of the payment of the Exercise
Price in the manner set forth in Section 1.1, the Registered Holder shall have
the right (but not the obligation) to convert this Warrant, in whole or part,
into Common Stock ("Conversion Right") as follows: Upon exercise of the
Conversion Right, the Company shall deliver to the Registered Holder (without
payment by the Registered Holder of any of the Exercise Price) that number of
shares of Common Stock equal to the quotient obtained by dividing (x) the
"Value" (as defined below) of the portion of the Warrant being converted on the
second trading day immediately preceding the date the Warrant is delivered to
the Company pursuant to Section 1.3 if the Conversion Right is exercised
("Valuation Date") by (y) the "Market Price" (as defined below) on the Valuation
Date.
The "Value" of the portion of the Warrant being converted shall equal the
remainder derived from subtracting (a) the Exercise Price multiplied by the
number of shares of Common Stock underlying the portion of the Warrant being
converted from (b) the Market Price of the Common Stock multiplied by the number
of shares of Common Stock underlying the portion of the Warrant being converted.
As used herein, the term "Market Price" at any date shall be deemed to be the
last reported sale price of the Common Stock on such date, or, in case no such
reported sale takes place on such day, the average of the last reported sale
prices for the immediately preceding three trading days, in either case, as
reported by the national securities exchange on which the Common Stock is listed
or admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or if any such exchange on which the
Common Stock is listed or admitted to trading is not its principal trading
market, the last sale price as reported by the Nasdaq Stock Market if the Common
Stock is quoted on the Nasdaq National Market or Nasdaq SmallCap Market. If the
Common Stock is not listed on a national securities exchange or quoted on the
Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the residual
over-the-counter market, the Market Price shall mean the last sale price for the
Common Stock, as reported by the NASD OTC Bulletin Board if quoted on the NASD
OTC Bulletin Board and, if not, the average of the bid and asked prices as
published by the National Quotation Bureau, Incorporated, or similar publisher
of such quotations. If the Market Price cannot be determined pursuant to the
above, the Market Price shall be such price as the Board of Directors of the
Company shall determine in good faith.
1.4 Exercise of Conversion Right. The Conversion Right may be exercised by
the Holder on any business day by delivering to the Company the Warrant with a
duly executed Notice of Exercise Form attached hereto as Exhibit I with the
conversion section completed by specifying the total number of shares of Common
Stock the Registered Holder will purchase pursuant to such conversion.
1.5 Date of Exercise. 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. At such time, the
person or persons in whose name or names any certificates for Warrant Shares
shall be issuable upon such exercise shall be deemed to have become the holder
or holders of record of the Warrant Shares represented by such certificates.
1.6 Issuance of Certificate. As soon as practicable after the exercise of
the purchase right represented by this Warrant, the Company at its expense will
use its best efforts to cause to be issued in the name of, and delivered to, the
Registered Holder, or, subject to the terms and conditions hereof, to such other
individual or entity as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full shares of
Warrant Shares to which such Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 4
hereof, and
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, stating on the face or faces thereof the
number of shares currently stated on the face of this Warrant minus the number
of such shares purchased by the Registered Holder upon such exercise as provided
in subsections 1.1 and 1.2 above.
1.7 Exercise Schedule. Subject to Section 1.7 hereof, the Warrant may be
exercised as follows:
(i) up to 50,000 Warrant Shares may be purchased if NetWolves
Corporation, a wholly owned subsidiary of the Company ("NetWolves") generates
revenues of at least $5,000,000, without a loss before provision for income
taxes, for the twelve month period commencing July 1, 1998 ("Fiscal Year");
(ii) up to 100,000 Warrant Shares may be purchased if NetWolves
generates at least $10,000,000 in revenues, with at least $2,000,000 in income
before provisions for income taxes, within the Fiscal Year;
(iii) up to 50,000 Warrant Shares may be purchased if NetWolves
generates revenue of $10,000,000, with at least $1,000,000 in income before
provision for income taxes, during the twelve month period following the Fiscal
Year; and
(iv) if the Warrant Shares described in clause (ii) did not become
purchasable under the condition stated, then such Warrant Shares will become
purchasable if NetWolves generates $20,000,000 in revenues, with at least
$4,000,000 in income before provision for income taxes, during the twelve month
period following the Fiscal Year.
1.8 Determination of NetWolves Revenues. In order to determine whether
NetWolves has generated the threshold level of revenues ("Threshold Level")
required pursuant to Section 1.6 hereof, for the exercise of this Warrant in any
applicable period, the Company shall cause its accountants to perform (i) a SAS
No. 71 review of the NetWolves statement of operations if it reasonably believes
that the revenues for such period are in excess of 20% of the Threshold Level or
(ii) an audit of the NetWolves' statement of operations if it reasonably
believes that the revenues for such period are in excess of the Threshold Level
by less than 20%. The Warrant will become exercisable pursuant to Section 1.6
hereof after the review or audit by the Company's accountants which confirms
that the Threshold Level has been met.
2. Adjustments.
2.1 Split, Subdivision or Combination of Shares. If the outstanding shares
of the Company's Common Stock at any time while this Warrant remains outstanding
and unexpired shall be subdivided or split into a greater number of shares, or a
dividend in Common Stock shall be paid in respect of Common Stock, the Exercise
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall, simultaneously with the effectiveness of such subdivision
or split or immediately after the record date of such dividend (as the case may
be), shall be proportionately decreased. If the outstanding shares of Common
Stock shall be combined or reverse-split into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination or reverse split
shall, simultaneously with the effectiveness of such combination or reverse
split, be proportionately increased. When any adjustment is required to be made
in the Exercise Price, the number of shares of Warrant Shares purchasable upon
the exercise of this Warrant shall be changed to the number determined by
dividing (i) an amount equal to the number of shares issuable upon the exercise
of this Warrant immediately prior to such adjustment, multiplied by the Exercise
Price in effect immediately prior to such adjustment, by (ii) the Exercise Price
in effect immediately after such adjustment.
2.2 Reclassification Reorganization, Consolidation or Merger. In the case
of any reclassification of the Common Stock (other than a change in par value or
a subdivision or combination as provided for in subsection 2.1 above), or any
reorganization, consolidation or merger of the Company with or into another
corporation (other than a merger or reorganization with respect to which the
Company is the continuing corporation and which does not result in any
reclassification of the Common Stock), or a transfer of all or substantially all
of the assets of the Company, or the payment of a liquidating distribution then,
as part of any such reorganization, reclassification, consolidation, merger,
sale or liquidating distribution, lawful provision shall be made so that the
Registered Holder of this Warrant shall have the right thereafter to receive
upon the exercise hereof, the kind and amount of shares of stock or other
securities or property which such Registered Holder would have been entitled to
receive if, immediately prior to any such reorganization, reclassification,
consolidation, merger, sale or liquidating distribution, as the case may be,
such Registered Holder had held the number of shares of Common Stock which were
then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the Registered Holder of
this Warrant such that the provisions set forth in this Section 2 (including
provisions with respect to the Exercise Price) shall thereafter be applicable,
as nearly as is reasonably practicable, in relation to any shares of stock or
other securities or property thereafter deliverable upon the exercise of this
Warrant.
2.3 Price Adjustment. No adjustment in the per share Exercise Price shall
be required unless such adjustment would require an increase or decrease in the
Exercise Price of at least $0.01; provided, however, that any adjustments which
by reason of this paragraph are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 2 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be.
2.4 Price Reduction. Notwithstanding any other provision set forth in this
Warrant, at any time and from time to time during the period that this Warrant
is exercisable, the Company in it sole discretion may reduce the Exercise Price
or extend the period during which this Warrant is exercisable.
2.5 No Impairment. 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 hereunder by the Company but will at all times in good
faith assist in the carrying out of all the provisions of this Section 2 and in
the taking of all such actions as may be necessary or appropriate in order to
protect against impairment of the rights of the Registered Holder of this
Warrant to adjustments in the Exercise Price.
2.6 Notice of Adjustment. Upon any adjustment of the Exercise Price or
extension of the Warrant exercise period, the Company shall forthwith give
written notice thereto to the Registered Holder of this Warrant describing the
event requiring the adjustment, stating the adjusted Exercise Price and the
adjusted number of shares purchasable upon the exercise hereof resulting from
such event, and setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
3. Fractional Shares. The Company shall not be required to issue fractions of
shares of Common Stock upon exercise. If any fractions of a share would, but for
this Section 3, be issuable upon any exercise, in lieu of such fractional share
the Company shall round up or down to the nearest whole number.
4. Limitation on Sales. Each holder of this Warrant acknowledges that this
Warrant and the Warrant Shares, as of the date of original issuance of this
Warrant, have not been registered under the Securities Act of 1933, as amended
("Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise
in the absence of (i) an effective registration statement under the Act as to
this Warrant or such Warrant Shares or (ii) an opinion of counsel, reasonably
acceptable to the Company (the Company hereby agreeing that the opinion from
Xxxxxxxx Xxxxxx and Xxxxxx shall be acceptable), that such registration and
qualification are not required. The Warrant Shares issued upon exercise thereof
shall be imprinted with a legend in substantially the following form:
"THE ISSUANCE OF THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT OR APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED."
5. Certain Dividends. If the Company pays a dividend or makes a distribution on
the Common Stock ("Dividend"), other than a stock dividend payable in shares of
Common Stock, then the Company will pay or distribute to the Registered Holder
of this Warrant, upon the exercise hereof, in addition to the Warrant Shares
purchased upon such exercise, the Dividend which would have been paid to such
Registered Holder if it had been the owner of record of such Warrant Shares
immediately prior to the date on which a record is taken for such Dividend or,
if no record is taken, the date as of which the records holders of Common Stock
entitled to such Dividend are determined.
6. Notices of Record Date. In case: (i) the Company shall take a record of the
holders of its Common Stock (or other stock or securities at the time
deliverable upon the exercise of this Warrant) for the purpose of entitling or
enabling them to receive any dividend or other distribution, or to receive any
right to subscribe for or purchase any shares of any class or any other
securities, or to receive any other right, or (ii) of any capital reorganization
of the Company, any reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the surviving entity), or
any transfer of all or substantially all of the assets of the Company, or (iii)
of the voluntary or involuntary dissolution, liquidation or winding-up of the
Company, then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice, provided that the failure to mail such notice shall not affect the
legality or validity of any such action.
7. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Common Stock and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant. So long as
this Warrant remains outstanding, the Company shall maintain the listing of the
shares of Common Stock to be issued upon exercise on each national securities
exchange on which Common Stock is listed or on the Nasdaq Stock Market if the
Common Stock is then quoted on the Nasdaq Stock Market.
8. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
9. Transfers, etc.
9.1 Warrant Register. The Company will maintain a register containing the
names and addresses of the Registered Holders of this Warrant. Any Registered
Holder may change its, his or her address as shown on the warrant register by
written notice to the Company requesting such change.
9.2 Registered Holder. Until any transfer of this Warrant is made in the
warrant register, the Company may treat the Registered Holder of this Warrant as
the absolute owner hereof for all purposes; provided, however, that if and when
this Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
10. No Rights as Stockholder. Until the exercise of this Warrant, the Registered
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a stockholder of the Company.
11. Successors. The rights and obligations of the parties to this Warrant will
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, successors, assigns, pledgees, transferees and purchasers.
Without limiting the foregoing, the registration rights set forth in this
Warrant shall inure to the benefit of the Registered Holder and all the
Registered Holder's successors, heirs, pledgees, assignees, transferees and
purchasers of this Warrant and the Warrant Shares.
12. Change or Waiver. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
13. Headings. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
14. Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of New York as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state.
15. Jurisdiction and Venue. The Company (i) agrees that any legal suit, action
or proceeding arising out of or relating to this Warrant shall be instituted
exclusively in New York State Supreme Court, County of New York or in the United
States District Court for the Southern District of New York, (ii) waives any
objection to the venue of any such suit, action or proceeding and the right to
assert that such forum is not a convenient forum for such suit, action or
proceeding, and (iii) irrevocably consents to the jurisdiction of the New York
State Supreme Court, County of New York, and the United States District Court
for the Southern District of New York in any such suit, action or proceeding,
and the Company further agrees to accept and acknowledge service or any and all
process which may be served in any such suit, action or proceeding in New York
State Supreme Court, County of New York or in the United States District Court
for the Southern District of New York and agrees that service of process upon it
mailed by certified mail to its address shall be deemed in every respect
effective service of process upon it in any suit, action or proceeding.
16. Mailing of Notices, etc. All notices and other communications under this
Warrant (except payment) shall be in writing and shall be sufficiently given if
sent to the Registered Holder or the Company, as the case may be, by hand
delivery, private overnight courier, with acknowledgment of receipt, or by
registered or certified mail, return receipt requested, as follows:
Registered Holder: To Registered Holder's address on page 1
of this Warrant
Attention: [Name of Holder]
The Company: To the Company's Principal Executive Offices Attention:
President
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or by overnight courier or five (5) business days after
mailing.
WATCHDOG PATROLS, INC.
By:
Name:
Title:
EXHIBIT I
NOTICE OF EXERCISE
Date: ______________
TO: Watchdog Patrols, Inc.
00 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx Xxxxxxx, Xxx Xxxx 00000
1. The undersigned hereby elects to purchase _______ shares of the Common
Stock of Watchdog Patrols, Inc., pursuant to terms of the attached Warrant, and
tenders herewith payment of $________ (at the rate of $___ per share of Common
Stock) in payment of the Exercise Price pursuant thereto, together with all
applicable transfer taxes, if any.
or
The undersigned hereby elects to purchase ____ shares of Common Stock of
Watchdog Patrols, Inc. by surrender of the unexercised portion of the attached
Warrant (with a "Value" of $ based on a "Market Price" of $_______).
2. Please issue a certificate or certificates representing said shares of
the Common Stock in the name of the undersigned or in such other name as is
specified below.
Signature of Registered Holder
Print Name:
Notice: The signature to this form must correspond with the name as written
upon the face of the within Warrant in every particular without alteration or
enlargement or any change whatsoever.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name
(Print in Block Letters)
Address
