THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE BEEN TAKEN FOR
INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF, AND,
EXCEPT AS STATED IN THE WARRANT PURCHASE AGREEMENT DATED , 199 ,
PURSUANT TO WHICH SUCH SECURITIES WERE ISSUED, SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT OR
REGULATION A NOTIFICATION UNDER THE ACT COVERING SUCH SECURITIES OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY),
REASONABLY SATISFACTORY IN FORM AND CONTENT TO THE COMPANY, STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT.
VALUE AMERICA, INC.
No. B-
FORM OF
WARRANT TO PURCHASE
_______ SHARES (SUBJECT TO ADJUSTMENT) OF
COMMON STOCK
This certifies that for value received
or registered assigns
("Holder") is entitled, subject to the terms set forth below, at any time from
and after the time immediately prior to the Vesting Date (as hereinafter
defined) and before 5:00 P.M., Eastern Standard Time, on , 200 to
purchase from VALUE AMERICA, INC., a Virginia corporation (the "Company"),
( ) shares (subject to adjustment as described
herein), of the Common Stock, without par value per share (which authorized
class of shares is herein called the "Common Stock") of the Company, as
constituted on the Issue Date (as hereinafter defined), upon surrender hereof,
at the principal office of the Company referred to below, with a duly executed
subscription form in the form attached hereto as Exhibit A and simultaneous
payment therefor in lawful money of the United States or otherwise as
hereinafter provided, at the price of Ten Dollars ($10) per share, subject to
adjustment as described herein (the "Purchase Price"). The number and character
of such shares of Common Stock are subject to further adjustment as provided
below, and the term "Common Stock" shall include, unless the context otherwise
requires, the stock and other securities and property at the time receivable
upon the exercise of this Warrant.
The term "Warrants" as used herein shall include this Warrant and any
warrants delivered in substitution or exchange therefor as provided herein. As
used herein, "Issue Date" shall mean , 199 . The term "Vesting Date" as
used herein shall mean the earlier to occur of (i) , , (ii) an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, in which the offering price per
share of the Common Stock of the Company equals or exceeds the Purchase Price
then in effect (an "IPO"), (iii) the sale of all or substantially all of the
assets of the Company, (iv) any consolidation or merger involving the Company,
or (v) the acquisition by a single Person or group of Persons, in a single or
series of transactions, of in excess of a majority of the issued and outstanding
shares of capital stock of the Company having general voting power in electing
the Board of Directors of the Company (irrespective of whether or not at the
time such capital stock has or might have voting power by reason or the
happening of any contingency). As used herein, "Person" shall mean an
individual, corporation, partnership, association, trust, limited liability
company or any other entity or organization, including a government or political
subdivision or an agency, unit or instrumentality thereof.
1. Exercise. Subject to the provisions of Section 2 hereof, this Warrant
may be exercised at any time or from time to time from and after the time
immediately prior to the Vesting Date and before 5:00 P.M., Eastern Standard
Time, on , 200 on any business day, for the full number of shares of
Common Stock called for hereby, by surrendering it at the principal office of
the Company, at 0000 Xxxxxxxxxxxx Xxxxx, Xxxxxxxxxxxxxxx, Xxxxxxxx 00000, with
the subscription form duly executed, together with payment in an amount equal to
(a) the number of shares of Common Stock called for on the face of this Warrant,
as adjusted in accordance with the first paragraph of this Warrant (without
giving effect to any further adjustment herein) multiplied (b) by the Purchase
Price. Payment of this amount may be made (1) by payment in cash or by corporate
check, payable to the order of the Company, or (2) by the Company not issuing
that number of shares of Common Stock subject to this Warrant having a Fair
Market Value (as hereinafter defined) on the date of exercise equal to such sum,
as Holder may determine. This Warrant may be exercised for less than the full
number of shares of Common Stock at the time called for hereby, except that the
number of shares receivable upon the exercise of this Warrant as a whole, and
the sum payable upon the exercise of this Warrant as a whole, shall be
proportionately reduced. Upon a partial exercise of this Warrant in accordance
with the terms hereof, this Warrant shall be surrendered, and a new Warrant of
the same tenor and for the purchase of the number of such shares not purchased
upon such exercise shall be issued by the Company to Holder without any charge
therefor. A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock
-2-
issuable upon such exercise shall be treated for all purposes as the holder of
such shares of record as of the close of business on such date. As soon as
practicable on or after such date, the Company shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of full shares of Common Stock issuable upon such exercise, together
with cash, in lieu of any fraction of a share, equal to such fraction of the
then Fair Market Value on the date of exercise of one full share of Common
Stock.
"Fair Market Value" shall mean, as of any date, (i) if shares of the Common
Stock are listed on a national securities exchange, the average of the closing
prices as reported for composite transactions during the 20 consecutive trading
days preceding the trading day immediately prior to such date or, if no sale
occurred on a trading day, then the mean between the closing bid and asked
prices on such exchange on such trading day; (ii) if shares of the Common Stock
are not so listed but are traded on the Nasdaq National Market ("NNM"), the
average of the closing prices as reported on the NNM during the 20 consecutive
trading days preceding the trading day immediately prior to such date or, if no
sale occurred on a trading day, then the mean between the highest bid and lowest
asked prices as of the close of business on such trading day, as reported on the
NNM; or (iii) if the shares of the Common Stock are not traded on a national
securities exchange or the NNM but are otherwise traded over-the-counter, the
arithmetic average (for consecutive trading days) of the mean between the
highest bid and lowest asked prices as of the close of business during the 20
consecutive trading days preceding the trading day immediately prior to such
date as quoted on the National Association of Securities Dealers Automated
Quotation system or an equivalent generally accepted reporting service. If none
of (i), (ii) or (iii) of the preceding sentence applies, "Fair Market Value"
shall mean, as of the date in question, the fair market value of the Common
Stock as determined by the Board of Directors of the Company, provided, that if
the Holder does not agree with such value, the fair market value shall be that
price established by an investment banking firm of national repute selected by
both the Company and Holder (with the Company bearing the expenses of such
investment banking firm).
2. Mandatory Exercise. This Warrant has been issued in connection with that
certain Amended and Restated Revolving Loan Agreement dated as of November 17,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Revolving Loan Agreement") by and between The Union Labor Life Insurance
Company, acting on behalf of its Separate Account P ("ULLICO"), and the Company
and each Participation Agreement (collectively, the "Participation Agreements")
entered into by and between ULLICO and various individuals and entities
(collectively, the "Participants") in connection with the Revolving Loan
Agreement.
A. By acceptance of this Warrant, the Holder agrees that upon the closing
of the IPO, the Holder shall be deemed to have exercised this Warrant, to the
extent
-3-
provided in Section 2.C, automatically without any further action by the Holder
(the "Automatic Exercise").
B. Upon the Automatic Exercise, Xxxxxx shall surrender this Warrant to the
Company, at its principal executive office or at the office of any transfer
agent for the Common Stock, and shall pay the Purchase Price for shares of
Common Stock subject to this Warrant, to the extent provided in Section 2.C, by
the cancellation of indebtedness of the Company then outstanding under the
Revolving Loan Agreement equal to the difference between (i) the principal
amount of all indebtedness of the Company then outstanding under the Revolving
Loan Agreement and (ii) the aggregate indebtedness of the Company then
outstanding under the Revolving Loan Agreement that is held by the Participants,
directly or indirectly, as a participant through ULLICO in such indebtedness (as
to Holder, the "Canceled Indebtedness").
C. The number of shares of Common Stock issuable to the Holder upon the
Automatic Exercise shall be equal to the quotient of (i) the principal amount of
the Canceled Indebtedness, divided by (ii) the Purchase Price then in effect.
The Company shall issue a new Warrant to Holder for the difference, if any,
between the number of shares subject to this Warrant and the number of shares
issued as provided in the immediately preceding sentence.
D. The cancellation of the Canceled Indebtedness and the Automatic Exercise
shall be deemed to have occurred automatically upon the closing of the IPO,
provided, that upon the closing of the IPO the Company pays to Holder (i) the
accrued interest in the Canceled Indebtedness and (ii) Holder's direct or
indirect interest in the unpaid principal amount of the indebtedness of the
Company, if any, that arises under the Revolving Loan Agreement and that is not
canceled upon an IPO under this Warrant or any similar Warrant issued by the
Company to any other direct or indirect holder of such indebtedness.
X. Xxxxxx shall deliver, or shall direct ULLICO to deliver, an instrument
evidencing the Canceled Indebtedness to the Company, marked "Paid in Full,"
against delivery to ULLICO of a cashier's check payable to Holder representing
the payment described in Section 2.D.
F. PRIOR TO THE IPO, HOLDER SHALL NOT SELL, TRANSFER, ASSIGN OR PLEDGE THIS
WARRANT TO ANY PERSON UNLESS SUCH SALE, TRANSFER, ASSIGNMENT OR PLEDGE
CONSTITUTES A SALE, TRANSFER, ASSIGNMENT OR PLEDGE OF THIS WARRANT TO SUCH
PERSON IN ITS ENTIRETY. ANY SALE, TRANSFER, ASSIGNMENT OR PLEDGE OR ATTEMPTED
SALE, TRANSFER, ASSIGNMENT OR PLEDGE OF THIS WARRANT IN VIOLATION OF THIS
RESTRICTION SHALL BE NULL AND VOID.
3. Payment of Taxes. All shares of Common Stock issued upon the exercise of
a Warrant shall be validly issued, fully paid and non-assessable, and the
-4-
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof.
4. Transfer and Exchange. This Warrant and all rights hereunder are
transferable, in whole or in part, on the books of the Company maintained for
such purpose at its principal office referred to above by Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with a
completed and executed assignment form in the form attached as Exhibit B and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. Upon any partial transfer, the Company will issue and
deliver to Holder a new Warrant or Warrants with respect to the shares of Common
Stock not so transferred. 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 that when this Warrant shall have been so
endorsed, the holder hereof may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered Holder hereof as the owner for all purposes.
This Warrant is exchangeable at such office for Warrants for the same
aggregate number of shares of Common Stock, each new Warrant to represent the
right to purchase such number of shares as the Holder shall designate at the
time of such exchange.
5. A. Adjustment for Dividends in Other Stock and Property;
Reclassifications. In case at any time or from time to time the holders of the
Common Stock (or any shares of stock or other securities at the time receivable
upon the exercise of this Warrant) shall have received, or, on or after the
record date fixed for the determination of eligible shareholders, shall have
become entitled to receive, without payment therefor,
(1) other or additional stock or other securities or
property (other than cash) by way of dividend,
(2) any cash or other property paid or payable out of
any source other than retained earnings (determined in accordance
with generally accepted accounting principles), or
(3) other or additional stock or other securities
or property (including cash) by way of stock-split, spin-off,
reclassification, combination of shares or similar
corporate rearrangement,
(other than (x) additional shares of Common Stock or any other stock or
securities into which such Common Stock shall have been changed, (y) any other
stock or securities convertible
-5-
into or exchangeable for such Common Stock or such other stock or securities or
(z) any Stock Purchase Rights (as hereinafter defined), issued as a stock
dividend or stock-split, adjustments in respect of which shall be covered by the
terms of Section 5.C, 4.D or 4.H), then and in each such case Holder, upon the
exercise hereof as provided in Section 1 or Section 2, shall be entitled to
receive the amount of stock and other securities and property (including cash in
the cases referred to in clauses (2) and (3) above) which such Holder would hold
on the date of such exercise if on the Issue Date Holder had been the holder of
record of the number of shares of Common Stock called for on the face of this
Warrant, as adjusted in accordance with the first paragraph of this Warrant, and
had thereafter, during the period from the Issue Date to and including the date
of such exercise, retained such shares and/or all other or additional stock and
other securities and property (including cash in the cases referred to in clause
(2) and (3) above) receivable by it as aforesaid during such period, giving
effect to all adjustments called for during such period by Sections 5.A and 4.B.
B. Adjustment for Reorganization, Consolidation and Merger. In case of any
reorganization of the Company (or any other corporation the stock or other
securities of which are at the time receivable on the exercise of this Warrant)
after the Issue Date, or in case, after such date, the Company (or any such
other corporation) shall consolidate with or merge into another corporation or
entity or convey all or substantially all its assets to another corporation or
entity, then and in each such case Holder, upon the exercise hereof as provided
in Section 1 or Section 2 at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such Holder would have been entitled upon such
consummation if Holder had exercised this Warrant immediately prior thereto, all
subject to further adjustment as provided in Sections 5.A, 4.B, 4.C and 4.D; in
each such case, the terms of this Warrant shall be applicable to the shares of
stock or other securities or property receivable upon the exercise of this
Warrant after such consummation.
C. Adjustment for Certain Dividends and Distributions. If the Company at
any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then and in
each such event
(1) the Purchase Price then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Purchase Price then in effect
by a fraction (A) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (B) the denominator of which
shall be the total number of shares of
-6-
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date as the case may be, plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Purchase Price shall be recomputed accordingly as of the
close of business on such record date, and thereafter the Purchase Price shall
be adjusted pursuant to this Section 5.C as of the time of actual payment of
such dividends or distributions; and
(2) the number of shares of Common Stock theretofore receivable upon the
exercise of this Warrant shall be increased, as of the time of such issuance or,
in the event such record date is fixed, as of the close of business on such
record date, in inverse proportion to the decrease in the Purchase Price.
D. Stock Split and Reverse Stock Split. If the Company at any time or from
time to time effects a stock split or subdivision of the outstanding Common
Stock, the Purchase Price then in effect immediately before that stock split or
subdivision shall be proportionately decreased and the number of shares of
Common Stock theretofore receivable upon the exercise of this Warrant shall be
proportionately increased. If the Company at any time or from time to time
effects a reverse stock split or combines the outstanding shares of Common Stock
into a smaller number of shares, the Purchase Price then in effect immediately
before that reverse stock split or combination shall be proportionately
increased and the number of shares of Common Stock theretofore receivable upon
the exercise of this Warrant shall be proportionately decreased. Each adjustment
under this Section 5.D shall become effective at the close of business on the
date the stock split, subdivision, reverse stock split or combination becomes
effective.
E. No Dilution or Impairment. The Company will not, by amendment of its
certificate of incorporation or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of the Warrants, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any share of stock
receivable upon the exercise of the Warrants above the amount payable therefor
upon such exercise, and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares upon the exercise of all Warrants at the time
outstanding.
-7-
F. Accountants' Certificate as to Adjustment. In each case of an adjustment
in the number of shares of Common Stock or the number or type of other stock,
securities or property receivable on the exercise of the Warrants, the Company
at its expense shall cause independent public accountants of recognized standing
selected by the Company (who may be the independent public accountants then
auditing the books of the Company) to compute such adjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant at the time outstanding.
G. Notices of Record Date. In case
(1) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the
exercise of the Warrants) for the purpose of entitling them to receive
any dividend or other distribution, or any right to subscribe for or
purchase any shares of stock of any class or any other securities, or
to receive any other right, or
(2) 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, or any conveyance of all or substantially all of the
assets of the Company to another corporation, or
(3) of any voluntary dissolution, liquidation or winding-up of
the Company,
then, and in each such case, the Company will mail or cause to be mailed to each
holder of a Warrant at the time outstanding a notice specifying, as the case may
be, (a) 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 (b) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is expected to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock (or such stock or securities at the
time receivable upon the exercise of the Warrants) 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, conveyance, dissolution, liquidation or winding-up, such
notice shall be mailed at least 30 days prior to the date therein specified.
H. Stock Purchase Rights. If at any time or from time to time, the Company
grants or issues to the record holders of the Common Stock any options,
-8-
warrants or subscription rights (collectively, the "Stock Purchase Rights")
entitling a holder to purchase Common Stock or any security convertible into or
exchangeable for Common Stock or to purchase any other stock or securities of
the Company, the Holder shall be entitled to acquire, upon the terms applicable
to such Stock Purchase Rights, the aggregate Stock Purchase Rights which Holder
could have acquired if Holder had been the record holder of the maximum number
of shares of Common Stock issuable upon exercise of this Warrant on both (x) the
record date for such grant or issuance of such Subscription Rights, and (y) the
date of the grant or issuance of such Stock Purchase Rights.
6. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory
to it (in the exercise of reasonable discretion) of the ownership of and the
loss, theft, destruction or mutilation of any Warrant and (in the case of loss,
theft or destruction) of indemnity satisfactory to it (in the exercise of
reasonable discretion), and (in the case of mutilation) upon surrender and
cancellation thereof, the Company will execute and deliver in lieu thereof a new
Warrant of like tenor.
7. Reservation of Common Stock. The Company shall at all times reserve and
keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants.
8. Warrant Purchase Agreement and Registration Rights Agreement. This
Warrant has been issued pursuant to the Warrant Purchase Agreement dated as of
, 199_ (the "Purchase Agreement") between the Company and
and
the transferability of this Warrant and the Common Stock issuable upon the
exercise hereof are subject to the Purchase Agreement. In addition, the Holder
of this Warrant and the Common Stock issuable upon the exercise hereof are
entitled to have such Common Stock registered under the Securities Act of 1933,
as amended, in accordance with that certain Registration Rights Agreement dated
as of November 17, 1998 among the Company and , as amended.
9. Notices. All notices and other communications from the Company to the
holder of this Warrant shall be mailed by first-class registered or certified
mail, postage prepaid, to the address furnished to the Company in writing by the
last holder of this Warrant who shall have furnished an address to the Company
in writing.
10. Change; Waiver. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
-9-
11. Headings. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part hereof.
12. Law Governing. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws, and not the law of conflicts
of laws, of the Commonwealth of Virginia.
DATED: , 199
VALUE AMERICA, INC.
By:_______________________________
Name: ____________________________
Title: ___________________________
-10-
EXHIBIT A
SUBSCRIPTION FORM
-----------------
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant and purchases _______ of the number of shares of Common Stock of Value
America, Inc., purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
DATED:__________________
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip)
EXHIBIT B
FORM OF ASSIGNMENT
------------------
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and does hereby irrevocably constitute and appoint __________________________
Attorney to make such transfer on the books of Value America, Inc., maintained
for the purpose, with full power of substitution in the premises.
DATED:__________________
-------------------------------
(Signature)
-------------------------------
(Witness)
