THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: GRIC Communications, Inc., a California corporation
Number of Shares: 45,000 (subject to the provisions set forth below)
Class of Stock: Series D Preferred
Initial Exercise Price: $4.00 per share
Issue Date: October __, 1998
Expiration Date: October __, 2003
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
series of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant.
For purposes of determining the foregoing, Holder shall be entitled to
purchase 15,000 Shares upon the execution of this Warrant. An additional 10,000
Shares shall be available for purchase by Holder upon Company's advance of at
least $750,000 under its loan with Holder as evidenced by that certain Loan and
Security Agreement of even date herewith (the "Loan Agreement"). The remaining
20,000 Shares (the "Final Shares") shall be available for purchase by Holder
upon the Company's advance of at least $1,500,000 in the aggregate under the
Loan Agreement. Notwithstanding the foregoing, in the event the Company closes
its private placement round of financing on or before October 31, 1998, Holder
shall only be entitled to purchase 10,000 shares of the Final Shares.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Section 1.4.
1.3 INTENTIONALLY OMITTED
1.4 FAIR MARKET VALUE. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On 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, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1.7.1. "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction. In
the event of an Acquisition, as part of such Acquisition lawful provision shall
be made so that there shall thereafter be deliverable upon the exercise of this
Warrant or any portion thereof (in lieu of or in addition to the number of
Shares theretofore deliverable, as appropriate), and without payment of any
additional consideration, the number of shares of stock or other securities or
property to which the holder of the number of Shares which would otherwise have
been deliverable upon the exercise of this Warrant or any portion thereof at the
time of such Acquisition would have been entitled to receive in such
Acquisition. This Section 1.7 shall apply to successive Acquisitions and to the
stock or securities of any other corporation that are at the time receivable
upon the exercise of this Warrant. If the per-share consideration payable to
Holder for Shares in connection with any transaction described in this Section
1.7 is in a form other than cash or marketable securities, then the value of
such consideration shall be determined in good faith by Company's Board of
Directors.
1.7.2. ASSUMPTION OF WARRANT. Upon the closing of any
Acquisition the successor entity shall assume the obligations of this Warrant.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays
a dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Xxxxxx would have been entitled had Xxxxxx owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to
2
Holder a new Warrant for such new securities or other property. The new
Warrant shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article 2
including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant.
The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares
are combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2.4 WEIGHTED AVERAGE ANTIDILUTION ADJUSTMENT. If at any time or
from time to time after the date of this Warrant the Company issues or sells
additional shares of Preferred Stock (as defined in the Company's Articles of
Incorporation) otherwise than (1) in connection with an Acquisition as provided
in Section 1.7; (2) splits or combinations as provided in section 2.1; and (3)
reclassifications as provided in section 2.2 or (4) any liquidation or
dissolution for an effective price (as hereinafter defined) that is less than
the Warrant Price in effect immediately prior to such issue or sale, then, and
in each such case, the Warrant Price shall be reduced, as of the close of
business on the date of such issue or sale, by multiplying it by a fraction (the
"APPLICABLE FRACTION"):
(i) The numerator of which shall be the sum of (A) the
number of Common Stock Equivalents Outstanding (as hereinafter defined)
immediately prior to such issue or sale of additional shares of Preferred Stock
plus (B) the quotient obtained by dividing the Aggregate Consideration Received
(as hereinafter defined) by the Company for the total number of additional
shares of Preferred Stock so issued or sold (or deemed so issued and sold) by
the Warrant Price in effect immediately prior to such issue or sale; and
(ii) The denominator of which shall be the sum of (A) the
number of Common Stock Equivalents Outstanding immediately prior to such issue
or sale plus (B) the number of additional shares of Preferred Stock so issued or
sold (or deemed so issued and sold);
and the total number of Warrant Shares shall be increased as of the close of
business on the date of such issue or sale, by multiplying it by a fraction
equal to the reciprocal of the Applicable Fraction.
(b) CERTAIN DEFINITIONS. For the purpose of making
any adjustment required under this Section 2.4:
(i) The "AGGREGATE CONSIDERATION RECEIVED" by
the Company for any issue or sale (or deemed issue or sale) of securities shall
(A) to the extent it consists of cash, be computed at the gross amount of cash
received by the Company before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale and without deduction of any expenses payable
by the Company; (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board; and (C) if additional shares of Preferred Stock are issued or sold
together with other stock or securities or other assets of the Company for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board to be
allocable to such additional shares of Preferred Stock.
(iii) "COMMON STOCK EQUIVALENTS OUTSTANDING"
shall mean the number of shares of Common Stock that is equal to the sum of (A)
all shares of Common Stock of the Company that are outstanding at the time in
question, plus (B) all shares of Common Stock of the Company issuable upon
conversion of all shares of Preferred Stock or other Convertible Securities that
are outstanding at the time in question, plus (C) all shares of Common Stock of
the Company that are issuable upon the exercise of Rights or Options that are
outstanding at the time in question assuming the
3
full conversion or exchange into Common Stock of all such Rights or Options
that are Rights or Options to purchase or acquire Convertible Securities into
or for Common Stock.
(iv) "CONVERTIBLE SECURITIES" shall mean stock
or other securities convertible into or exchangeable for shares of Common Stock.
(v) The "EFFECTIVE PRICE" of any issuance of
additional shares of Preferred Stock shall mean the quotient determined by
dividing the total number of additional shares of Preferred Stock issued or sold
by the Company under this Section 2.4, into the Aggregate Consideration
Received, or deemed to have been received, by the Company under this Section
2.4, for the issue of such additional shares of Preferred Stock; and
(vi) "RIGHTS OR OPTIONS" shall mean warrants,
options or other rights to purchase or acquire shares of Common Stock or
Convertible Securities.
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its
Articles of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the
Company takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant and the number of Shares to be
issued shall be rounded down to the nearest whole Share. If a fractional
share interest arises upon any exercise or conversion of the Warrant, the
Company shall eliminate such fractional share interest by paying Holder
amount computed by multiplying the fractional interest by the fair market
value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial
Officer setting forth such adjustment and the facts upon which such
adjustment is based. The Company shall, upon written request, furnish Holder
a certificate setting forth the Warrant Price in effect upon the date thereof
and the series of adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page
of this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
4
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. Within
sixty (60) days after the execution and delivery of this Warrant, Company shall
use its best efforts to cause Holder to become a party to the Third Amended and
Restated Registration Rights Agreement, dated as of December 24, 1997, as
amended after December 24, 1997, by and among Company and the shareholders of
Company named therein, attached hereto as EXHIBIT "A". ("Rights Agreement") and
Holder shall be deemed a 'Securityholder" and a "Holder", as defined in the
Rights Agreement, for purposes of the Rights Agreement and shall be entitled to
all the rights, and be subject to all the obligations, of a Holder under the
Rights Agreement, the Shares shall be deemed "Series D Preferred Stock", as
defined in the Rights Agreement, and the Common Stock issuable upon conversion
of the Shares shall be deemed "Registrable Securities", as defined in the Rights
Agreement, for purposes of the Rights Agreement. Such actions shall be effected
by Company executing and delivering to Holder a fully-executed Amendment to
Rights Agreement substantially in the form of EXHIBIT "B" hereto.
ARTICLE 4. MISCELLANEOUS.
4.1 TERM; NOTICE OF EXPIRATION. This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above.
4.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR
5
DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, (ii) AN OPINION OF
COUNSEL FOR HOLDER, REASONABLY SATISFACTORY TO COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING WITH
THE PROVISIONS OF ARTICLE 4 OF THE WARRANT UNDER WHICH THIS SECURITY WAS
ISSUED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and
the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder s notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.3
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares
or The Silicon Valley Bank Foundation, or, to any other transferree by giving
the Company notice of the portion of the Warrant being transferred setting forth
the name, address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for reissuance to the transferee(s)
(and Holder if applicable). Unless the Company is filing financial information
with the SEC pursuant to the Securities Exchange Act of 1934, the Company shall
have the right to refuse to transfer any portion of this Warrant (and in such
event Holder shall not transfer the Shares issuable upon exercise of this
Warrant) to any person who directly competes with the Company.
4.5 NOTICES. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
6
"COMPANY"
GRIC Communications, Inc.
By: ______________________________
Name: ______________________________
(Print)
Title: Chairman of the Board, President or Vice President
By: ______________________________
Name: ______________________________
(Print)
Title: Chief Financial Officer, Secretary, Assistant Treasurer or
Assistant Secretary
7
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the
Common/Preferred Series ___ [Strike one] Stock of GRIC Communications, Inc.
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to _____________________ of the Shares
covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
___________________________________________
(Name)
___________________________________________
___________________________________________
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
__________________________________
(Signature)
____________________
(Date)
EXHIBIT A
Third Amended and Restated Registration Rights Agreement
[Copy Attached]
EXHIBIT B
Amendment No. 2 to Third Amended and Restated Registration Rights Agreement
2
