THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO PATH 1 NETWORK TECHNOLOGIES INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
Right to Purchase 75,000 Shares of Common Stock of Path 1 Network Technologies
Inc. (subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2003-1 Issue Date: February __, 2003
PATH 1 NETWORK TECHNOLOGIES INC., a corporation organized under the
laws of the State of Delaware (the "COMPANY"), hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the "HOLDER"), is entitled,
subject to the terms set forth below, to purchase from the Company from and
after the Issue Date of this Warrant and at any time or from time to time before
5:00 p.m., New York time, through five (5) years after such date (the
"EXPIRATION DATE"), up to 75,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.001 par value, of the Company, at the Exercise
Price (as defined below). The number and character of such shares of Common
Stock and the Exercise Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Path 1 Network Technologies Inc.
and any corporation which shall succeed or assume the obligations of Path 1
Network Technologies Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
par value $.001 per share, and (b) any other securities into which or for which
any of the securities described in (a) may be converted or exchanged pursuant to
a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
(d) The term "EXERCISE PRICE" shall be $___ per share [100% of closing
price, determined on closing date].
1. EXERCISE OF WARRANT. 1.1 Number of Shares Issuable upon Exercise.
From and after the date hereof through and including the Expiration Date, the
Holder shall be entitled to receive, upon exercise of this Warrant in whole or
in part, by delivery of an original or fax copy of the exercise notice attached
hereto as Exhibit A (the "EXERCISE NOTICE"), shares of Common Stock of the
Company, subject to adjustment pursuant to Section 4. 1.2 Fair Market Value.
Fair Market Value of a share of Common Stock as of a particular date (the
"DETERMINATION DATE") shall mean:
(a) If the Company's Common Stock is traded on an exchange or is quoted on the
National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
National Market or the NASDAQ SmallCap Market, then the closing or last sale
price, respectively, reported for the last business day immediately preceding
the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange or on the NASDAQ
National Market or the NASDAQ SmallCap Market but is traded on the NASD OTC
Bulletin Board or BBX Exchange, then the mean of the average of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common Stock is not
publicly traded, then as the Holder and the Company agree or in the absence of
agreement by arbitration in accordance with the rules then in effect of the
American Arbitration Association, before a single arbitrator to be chosen from a
panel of persons qualified by education and training to pass on the matter to be
decided.
(d) If the Determination Date is the date of a liquidation, dissolution or
winding up, or any event deemed to be a liquidation, dissolution or winding up
pursuant to the Company's charter, then all amounts to be payable per share to
holders of the Common Stock pursuant to the charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter, assuming
for the purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of the Warrant are outstanding at the Determination Date.
2. PROCEDURE FOR EXERCISE.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company agrees that
the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares as aforesaid. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within 3 business
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as such Holder (upon payment by such holder of any applicable
transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) to which
such Holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value of one full share, together
with any other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 1 or otherwise.
2.2 Exercise.
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(a) Payment may be made either in (i) cash or by certified or official bank
check payable to the order of the Company equal to the applicable aggregate
Exercise Price, (ii) by delivery of the Warrant, Common Stock and/or Common
Stock receivable upon exercise of the Warrant in accordance with Section (b)
below, or (iii) by a combination of any of the foregoing methods, for the number
of Common Shares specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable to the holder per the terms of this Warrant) and the Holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.
(b) Notwithstanding any provisions herein to the contrary, if the Fair Market
Value of one share of Common Stock is greater than the Exercise Price (at the
date of calculation as set forth below), in lieu of exercising this Warrant for
cash, the Holder may elect to receive shares equal to the value (as determined
below) of this Warrant (or the portion thereof being exercised) by surrender of
this Warrant at the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:
X=Y (A-B)
A
Where X= the number of shares of Common Stock to be issued to the
Holder
Y= the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised (at the date of such calculation)
A= the Fair Market Value of one share of the Company's Common Stock
(at the date of such calculation)
B= Exercise Price (as adjusted to the date of such calculation)
3. EFFECT OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.
3.1 Reorganization, Consolidation, Merger, etc. In case at any time or from time
to time, the Company shall (a) effect a reorganization, (b) consolidate with or
merge into any other person, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1 at any time after the consummation
of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4. 3.2 Dissolution. In the event of
any dissolution of the Company following the transfer of all or substantially
all of its properties or assets, the Company, prior to such dissolution, shall
at its expense deliver or cause to be delivered the stock and other securities
and property (including cash, where applicable) receivable by the Holder of the
Warrant after the effective date of such dissolution pursuant to Section 3.1 to
a bank or trust company having its principal office in New York, NY, as trustee
for the Holder of the Warrant. 3.3 Continuation of Terms. Upon any
reorganization, consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 3, this Warrant shall continue in full
force and effect and the terms hereof shall be applicable to the shares of stock
and other securities and property receivable on the exercise of this Warrant
after the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4. In the event this Warrant does not continue in full force and
effect after the consummation of the transactions described in this Section 3,
then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the holders of the Warrant be delivered to
the Trustee as contemplated by Section 3.2.
3.4 Adjustment of Warrant Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever on or after the date hereof, the Company issues or
sells, or is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company) for a consideration per share less than a price
(the "APPLICABLE PRICE") equal to the Exercise Price in effect immediately prior
to such issuance or sale, then immediately after such issue or sale the Exercise
Price then in effect shall be reduced to an amount equal to such consideration
per share. If the Company in any manner issues or sells any convertible
securities and the lowest price per share for which one share of Common Stock is
issuable upon such conversion, exchange or exercise thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such convertible securities for such price per share. For
the purposes of this section, the "lowest price per share for which one share of
Common Stock is issuable upon such conversion, exchange or exercise" shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of Common Stock upon the
issuance or sale of the convertible security and upon conversion, exchange or
exercise of such convertible security. No further adjustment of the Exercise
Price shall be made upon the actual issuance of such Common Stock upon
conversion, exchange or exercise of such convertible securities, and if any such
issue or sale of such convertible securities is made upon exercise of any
options for which adjustment of the Exercise Price had been or are to be made
pursuant to other provisions of this section, no further adjustment of the
Exercise Price shall be made by reason of such issue or sale.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding shares
of Common Stock, or (c) combine its outstanding shares of the Common Stock into
a smaller number of shares of the Common Stock, then, in each such event, the
Exercise Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Exercise Price then in effect. The Exercise
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The number
of shares of Common Stock that the holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 1, be entitled to receive shall be
increased or decreased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or readjustment
in the shares of Common Stock (or Other Securities) issuable on the exercise of
the Warrant, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the holder of the Warrant and any Warrant agent
of the Company (appointed pursuant to Section 11 hereof).
6. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, shares of Common Stock (or Other Securities) from time
to time issuable on the exercise of the Warrant.
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "TRANSFEROR") with respect to any
or all of the Shares. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"TRANSFEROR ENDORSEMENT FORM") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable securities
laws, which shall include, without limitation, a legal opinion from the
Transferor's counsel that such transfer is exempt from the registration
requirements of applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant so surrendered by the Transferor. 8.
REPLACEMENT OF WARRANT. On 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 of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth in a
Registration Rights Agreement entered into by the Company and Purchaser of the
Company's Convertible Note (the "NOTE") at or prior to the issue date of this
Warrant. 10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this proviso is being made on
an exercise date, which would result in beneficial ownership by the Holder and
its affiliates of more than 4.99% of the outstanding shares of Common Stock of
the Company on such date. For the purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to
aggregate exercises which would result in the issuance of more than 4.99%. The
restriction described in this paragraph may be revoked upon 75 days prior notice
from the Holder to the Company and is automatically null and void upon an Event
of Default under the Note.
11. WARRANT AGENT. The Company may, by written notice to the each holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
12. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred on the
books of the Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. NOTICES, ETC. 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, at such address as may have been furnished to the Company
in writing by such holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder of this Warrant who has
so furnished an address to the Company. 14. VOLUNTARY ADJUSTMENT BY THE COMPANY.
The Company may at any time during the term of this Warrant reduce the then
current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
15. MISCELLANEOUS. 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. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws. Any
action brought concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York; provided, however, that the Holder may choose to waive
this provision and bring an action outside the state of New York. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. The Company acknowledges that legal
counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
PATH 1 NETWORK TECHNOLOGIES INC.
By:_____________________________
Witness:
------------------------------
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Path 1 Network Technologies Inc.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchaseable
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ____________________ whose address is
______________________________
------------------------------------.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________ _______________________________________
(Signature must conform to name of holder as specified on
the face of the Warrant)
-------------------------------------
(Address)
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Path 1 Network Technologies Inc. to which the within
Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Path 1 Network Technologies Inc. with full power of substitution in the
premises.
---------------------------------------- -------------------------------------- --------------------------------------
Percentage Number
Transferees Transferred Transferrred
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Dated:___________________ _______________________________________
Signature must conform to name of holder as specified on
the face of the Warrant)
Signed in the presence of:
--------------------------------- ----------------------------------------
(Name) (address)
ACCEPTED AND AGREED: ________________________________________
[TRANSFEREE] (address)
-----------------------------
(Name)
