Exhibit 10.10
WARRANT AGREEMENT
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This WARRANT AGREEMENT, dated as of August 15, 2000, is made between
VELOCITYHSI, INC., a Delaware corporation (the "Company"), and BANC OF AMERICA
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MORTGAGE CAPITAL CORPORATION, a North Carolina corporation (the "Warrant
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Holder").
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WHEREAS, in consideration of the payment of ONE HUNDRED TWELVE THOUSAND
FIVE HUNDRED DOLLARS ($112,500), the Company proposes to issue to the Warrant
Holder, Common Stock Purchase Warrants, as hereinafter described (the
"Warrants"), to purchase an aggregate of FOUR HUNDRED FIFTY THOUSAND (450,000)
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shares of Common Stock, par value $0.01 per share (the "Common Stock"), of the
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Company (the Common Stock issued or issuable on exercise of the Warrants being
herein called the "Warrant Shares"), pursuant to this Warrant Agreement (this
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"Agreement").
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NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1. Purchase of Warrants. Concurrently with the execution hereof,
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the Warrant Holder is delivering to the Company aggregate consideration of One
Hundred Twelve Thousand Five Hundred Dollars ($112,500) against the delivery by
the Company of certificates evidencing the Warrants (the "Warrant
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Certificates").
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SECTION 2. Warrant Certificates. Warrant Certificates to be delivered to
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the Warrant Holder pursuant to this Agreement shall be in registered form only
and shall be substantially in the form set forth in Exhibit A attached hereto.
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Warrant Certificates shall be signed on behalf of the Company by its Chairman of
the Board or its President or a Vice President and by its Secretary or an
Assistant Secretary. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, President, Vice President, Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Warrant Certificates, and, for that
purpose, the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be delivered or disposed of he shall have ceased to hold such
office.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificates so
signed shall have been disposed of by the Company, such Warrant Certificates
nevertheless may be delivered or disposed of as though such person had not
ceased to be such officer of the Company; and any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a
proper officer of the Company to sign such Warrant Certificate, although at the
date of the execution of this Agreement any such person was not such officer.
SECTION 3. Registration. The Company shall number and register the Warrant
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Certificates in a register as they are issued. The Company may deem and treat
the registered holder(s) of the Warrant Certificates as the absolute owner(s)
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone), for all purposes, and shall not be affected by any notice to the
contrary.
SECTION 4. Registration of Transfers and Exchanges. Subject to compliance
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with the terms of clause (iv) of the Warrant Certificate, the Company shall from
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time to time register the transfer of any outstanding Warrant Certificates in a
Warrant register to be maintained by the Company upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be cancelled and disposed of by the Company. Warrant
Certificates may be exchanged at the option of the holder(s) thereof when
surrendered to the Company at its office for another Warrant Certificate or
other Warrant Certificates of like tenor and representing in the aggregate a
like number of Warrants. Warrant Certificates surrendered for exchange shall be
cancelled and disposed of by the Company.
SECTION 5. Warrants; Exercise of Warrants. Subject to the terms of this
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Agreement, each Warrant Holder shall have the right, which may be exercised
commencing at the opening of business on the date hereof and until 5:00 p.m.,
Los Angeles time, on August 15, 2005 (the "Expiration Date"), to receive from
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the Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants and
payment of the Exercise Price then in effect for such Warrant Shares. In the
alternative, each holder may exercise its right, during the Exercise Period, to
receive Warrant Shares on a net basis, such that, without the exchange of any
funds, the holder shall receive that number of Warrant Shares otherwise issuable
upon exercise of its Warrants less that number of Warrant Shares having an
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aggregate current market price (as defined in Section 10(e) below) at the time
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of exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the holder of such Warrants. Each Warrant not exercised prior to the
Expiration Date shall become void, and all rights thereunder and all rights
under this Agreement in respect of Warrants not exercised prior to the
Expiration Date shall cease as of the Expiration Date.
A Warrant may be exercised upon surrender to the Company at its office
designated for such purpose (the address of which is set forth in Section 14
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hereof) of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase in or substantially in the form
thereof attached thereto duly filled in
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and signed, and upon payment to the Company of the exercise price (the "Exercise
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Price") which is $1.20 per share on the date hereof, but which is subject to
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adjustment as herein provided, for the number of Warrant Shares in respect of
which such Warrants are then exercised. Payment of the aggregate Exercise Price
shall be made (i) in cash or by certified or official bank check payable to the
order of the Company or by wire transfer, (ii) through the surrender of debt or
preferred equity securities of the Company having a principal amount or
liquidation preference, as the case may be, equal to the aggregate Exercise
Price to be paid (the Company will pay the accrued interest or dividends on such
surrendered debt or preferred equity securities in cash at the time of surrender
notwithstanding the stated terms thereof), or (iii) in the manner provided in
the first paragraph of this Section 5.
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Subject to the provisions of Section 6 hereof and clause (iv) of the Warrant
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Certificate, upon such surrender of Warrants and payment of the Exercise Price
the Company shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of the Warrant Holder and in such name or names as
the Warrant Holder may designate, a certificate or certificates for the number
of full Warrant Shares issuable upon the exercise of such Warrants together with
cash as provided in Section 11; provided, however, that if any consolidation,
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merger or lease or sale of assets is proposed to be effected by the Company as
described in subsection (j) of Section 10 hereof, or a tender offer or an
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exchange offer for shares of Common Stock of the Company shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid, the
Company shall, as soon as possible, but in any event not later than two (2)
business days thereafter, issue and cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence, together with cash in lieu of fractional shares as
provided in Section 11. Such certificate or certificates shall be deemed to
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have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the holders thereof,
either in full or from time to time in part and, in the event that a certificate
evidencing Warrants is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new certificate evidencing the remaining Warrant or Warrants
(excluding the Warrant Shares, if any, retained by the Company in payment of the
Exercise Price as provided in the first paragraph of this Section 5) will be
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issued and delivered pursuant to the provisions of this Section 5 and of Section
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2 hereof.
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All Warrant Certificates surrendered upon exercise of Warrants shall be
cancelled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the holders during normal business hours at its office.
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SECTION 6. Payment of Taxes. The Company will pay all documentary stamp
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taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided, however, that the Company shall not be required to pay
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any tax or taxes which may be payable in respect of any transfer of any Warrant
Certificates or any certificates for Warrant Shares into a name other than that
of the registered holder of a Warrant Certificate surrendered upon the exercise
of a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 7. Mutilated or Missing Warrant Certificates. In case any of the
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Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also reasonably satisfactory to it. Applicants for
such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
SECTION 8. Reservation of Warrant Shares. The Company will at all times
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reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum number
of shares of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock (the
"Transfer Agent") and every subsequent transfer agent for any shares of the
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Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto transmitted to each holder pursuant
to Section 13 hereof.
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Before taking any action which would cause an adjustment pursuant to
Section 10 hereof to reduce the Exercise Price below the then par value (if any)
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of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
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The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof resulting from any action taken by the
Company, excluding any taxes described in Section 6 hereof which the Company
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shall not be obligated to pay and any related liens, charges and security
interests.
SECTION 9. Obtaining Securities Exchange Listings. The Company will from
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time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed.
SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares
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Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
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exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events and the development of the conditions enumerated in
this Section 10. For purposes of this Section 10, the term "Common Stock" means
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shares now or hereafter authorized of any class of common stock of the Company
and any other capital stock of the Company, howsoever designated, that has the
right (subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.
(a) Adjustments for Changes in Capital Stock.
If and on each occasion that the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of
its capital stock;
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then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant, upon exercise of its
Warrant, shall be entitled to receive shares of two or more classes of capital
stock of the Company, the Company shall determine the allocation of the adjusted
Exercise Price between the classes of capital stock. After such allocation, the
exercise privilege and the Exercise Price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section 10.
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Such adjustment shall be made successively if and on each occasion
that any event described above shall occur.
(b) Adjustments for Rights Issues.
If and on each occasion that the Company distributes any rights,
options or warrants to all holders of its Common Stock entitling them for a
period expiring within 60 days after the record date mentioned below to purchase
shares of Common Stock at a price per share less than the Exercise Price in
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effect on that record date, the Exercise Price shall be adjusted in accordance
with the formula:
O + N x P
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E' = E x E
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O + N
where:
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E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
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The adjustment shall be made successively if and on each occasion that
any such rights, options or warrants are issued and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive the rights, options or warrants. If, at the end of the period during
which such rights, options or warrants are exercisable, not all rights, options
or warrants shall have been exercised, the Exercise Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustments for Common Stock Issuances.
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If and on each occasion that the Company issues shares of Common Stock
for a consideration per share less than Exercise Price in effect on the date the
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Company fixes the offering price of such additional shares, the Exercise Price
shall be adjusted in accordance with the formula:
P
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E' = E x O + E
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A
where:
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E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively if and on each occasion that
any such issuance is made and shall become effective immediately after such
issuance.
This subsection (c) shall not apply to:
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(1) any of the transactions described in subsection (b) of this
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Section 10,
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(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
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(3) Common Stock issued to the Company's employees under bona fide
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employee benefit plans adopted by the Board of Directors and approved by
the holders of Common Stock when required by law, if such Common Stock
would otherwise be covered by this subsection (c) (but only to the extent
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that the aggregate number of shares excluded by this clause (3) and issued
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from time to time after the date of this Warrant Agreement shall not exceed
fifteen percent (15%) in the aggregate of all shares of Common Stock
actually outstanding at the time of the most recent grant of options under
any such plan and provided that the issuance of shares upon the exercise of
options to acquire 694,992 shares of Common Stock which were issued prior
to the date hereof shall not be counted for purposes of such fifteen
percent (15%) limitation),
(4) Common Stock issued upon the exercise of rights, options or
warrants issued to the holders of Common Stock,
(5) Common Stock issued to shareholders of any person which merges
into the Company in proportion to the stock holdings of such person
immediately prior to such merger, upon such merger,
(6) the sale of up to 1,721,816 shares of Common Stock at a price of
$0.50 per share to seven officers and employees of the Company as described
in the Company's Prospectus dated August 8, 2000 issued in connection with
the distribution by BRE Properties, Inc. of shares of Common Stock to its
shareholders of record on August 7, 2000, a copy of which the Warrant
Holder acknowledges receiving from the Company (the "Prospectus"), or
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(7) the issuance of an aggregate of 395,000 shares of Common Stock to
six employees of BRE Properties, Inc. without the payment of cash
consideration as described in the Prospectus.
(d) Adjustments for Convertible Securities Issuances.
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If and on each occasion that the Company issues any securities convertible
into or exchangeable for Common Stock (other than securities issued in
transactions described in subsection (b) or (c) of this Section 10) for a
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consideration per share of Common Stock initially deliverable upon conversion or
exchange of such securities less than the Exercise Price in effect on the date
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of issuance of such securities, then the Exercise Price shall be adjusted in
accordance with the formula:
P
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E' = E x O + E
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O + D
where:
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E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
D = the maximum number of shares deliverable upon conversion of or
in exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively if and on each occasion that any
such issuance is made and shall become effective immediately after such
issuance.
If all of the Common Stock deliverable upon conversion or exchange of such
securities has not been issued when such securities are no longer outstanding,
then the Exercise Price shall promptly be readjusted to the Exercise Price which
would then be in effect had the adjustment upon the issuance of such securities
been made on the basis of the actual number of shares of Common Stock issued
upon conversion or exchange of such securities. This subsection (d) does not
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apply to convertible securities issued to shareholders of any person which
merges into the Company in proportion to the stock holdings of such person
immediately prior to such merger, upon such merger.
(e) Current Market Price.
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For purposes of this Agreement, the current market price per share of
Common Stock on any date is the average of the Quoted Prices of the Common Stock
for the ten (10) consecutive trading days before the date in question. The
"Quoted Price" of the Common Stock is the last reported sales price of the
Common Stock as reported by the Nasdaq National Market, or if the Common Stock
is listed on a securities exchange, the last reported sales price of the Common
Stock on such exchange which shall be for consolidated trading if applicable to
such exchange, or if neither so reported or listed, the last reported bid price
of the Common Stock. In the absence of one or more such quotations, the Board of
Directors of the Company shall determine the current market price on a
reasonable basis and in good faith.
(f) Consideration Received.
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For purposes of any computations respecting consideration received pursuant
to subsections (c) and (d) of this Section 10, the following shall apply:
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(1) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash; provided, however, that
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in no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
on a reasonable basis and in good faith by the Board of Directors
(irrespective of the accounting treatment thereof), whose determination
shall be conclusive and shall be described in a Board resolution; and
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if
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any, to be received by the Company upon the conversion or exchange thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection (f)).
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(g) When De Minimis Adjustments May Be Deferred.
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No adjustment in the Exercise Price need be made unless the adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustments.
All calculations under this Section 10 shall be made to the nearest
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cent or to the nearest 1/100th of a share, as the case may be.
(h) When No Adjustments Required.
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No adjustments need be made for rights to purchase Common Stock pursuant to
a Company plan for reinvestment of dividends or interest .
No adjustments need be made for a change in the par value or no par value
of the Common Stock.
To the extent that the Warrants become convertible into cash, no
adjustments need be made thereafter as to the cash. Interest will not accrue on
the cash.
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(i) Notices of Adjustments.
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Whenever the Exercise Price is adjusted, the Company shall provide the
notices required by Section 14 hereof.
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(j) Notices of Certain Transactions.
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If:
(1) the Company takes any action that would require an
adjustment in the Exercise Price pursuant to subsections (a), (b), (c)
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or (d) of this Section 10;
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(2) the Company takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (k) of this
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Section 10;
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(3) the Company takes and action that would entitle the
holder(s) of Warrants or Warrant Shares to any rights pursuant to
subsection (n) of this Section 10; or
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(4) there is a liquidation, winding up or dissolution of the
Company;
then, in each such case, the Company shall mail to Warrant holders a written
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination reclassification,
consolidation, merger, transfer, lease, liquidation, winding up or dissolution.
The Company shall mail the written notice at least twenty (20) days before such
date. Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(k) Reorganization of Company.
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If the Company consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any person, then, upon consummation of
such transaction, the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger, if other than the Company, or the person to which such sale or
conveyance shall have been made, shall enter into a supplemental Warrant
Agreement so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for in this
Section
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10. The successor Company shall mail to Warrant holders a written notice
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describing the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of the Warrants under
the supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
If this subsection (k) applies, subsections (a), (b), (c) and (d) of this
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Section 10 shall not apply.
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(l) When Issuances or Payments May Be Deferred.
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In any case in which this Section 10 shall require that an adjustment in
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the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Warrant Shares
and other capital stock of the Company, if any, issuable upon such exercise over
and above the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Price, and (ii) paying
to such holder any amount in cash in lieu of a fractional share pursuant to
Section 11; provided, however, that the Company shall deliver to such holder a
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due ▇▇▇▇ or other appropriate instrument evidencing such holder's right to
receive such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(m) Adjustment in Number of Shares.
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Upon each adjustment of the Exercise Price pursuant to this Section 10,
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each Warrant outstanding prior to the making of the adjustment in the Exercise
Price shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of shares of Common Stock (calculated to the
nearest hundredth) obtained from the following formula:
N' = N x E
-
E'
where:
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N' = adjusted number of Warrant shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon exercise
of a Warrant by payment of the Exercise Price prior to
adjustment.
E' = the adjusted Exercise Price.
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E = the Exercise Price prior to adjustment.
(n) Certain Other Distributions.
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If and on each occasion that the Company distributes to all holders of
its Common Stock any of its assets, debt securities, preferred stock or other
assets or securities of the Company, or any rights, options or warrants to
purchase debt, securities, preferred stock, assets or other securities of the
Company, then, thereafter, the holder of any Warrant, upon the exercise of the
rights represented by such Warrant, will be entitled to receive the number of
Warrant Shares being purchased upon such exercise, and, in addition, and without
further payment, the other assets, securities and other property which such
holder would have received by way of such distribution if such holder (i) had
exercised such Warrant immediately prior to the making of such distribution so
as to be entitled thereto, and (ii) had retained all such distributions payable
in respect of such holder's Warrant Shares or in respect of any assets or
property paid as distributions in respect of such Warrant Shares.
(o) Form of Warrants.
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Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 11. Fractional Interests. The Company shall not be required
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to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of all of the Warrants so presented. If
any fraction of a Warrant Share would, notwithstanding the provisions of this
Section 11, be issuable on the exercise of any Warrants (or specified portion
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thereof), the Company shall pay an amount in cash equal to the Exercise Price on
the day immediately preceding the date the Warrant is presented for exercise,
multiplied by such fraction.
SECTION 12. Piggyback Registration Rights.
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(a) Registration Rights. If at any time during the "Registration
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Period" (as hereinafter defined) the Company proposes to file a registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
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relating to a proposed sale to the public of its Common Stock, whether or not
for its own account and whether or not pursuant to the exercise of any demand
registration rights held by other security holders (but excluding registrations
relating solely to employee stock option or purchase plans or to transactions
employing Forms S-4 or S-8, a registration in which the only stock
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being registered is Common Stock issuable upon conversion of securities which
are also being registered, and any registration on any form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares), the
Company will each such time give prompt written notice to the Warrant Holders of
its intention to do so and of the Warrant Holders' rights under this Section 12,
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at least twenty five (25) days prior to the anticipated filing date of the
registration statement. Such notice shall offer all Warrant Holders the
opportunity to include in such registration statement such number of Warrant
Shares as each such Warrant Holder may request. For purposes hereof, the term
"Registration Period" shall mean the period expiring on the seventh anniversary
-------------------
of the effective date of a registration statement covering shares of the
Company's Common Stock which are being offered pursuant to a firm commitment
underwritten offering in which an affiliate of the Warrant Holder is the lead
underwriter.
(b) Registration Procedures. Upon the written request of any Warrant
-----------------------
Holder made within ten (10) days after receipt of the Company's notice (which
request shall specify the number of Warrant Shares intended to be disposed of by
such Warrant Holder), the Company will use its best efforts to effect the
registration under the Securities Act and the qualification under any applicable
state securities or Blue Sky laws of all Warrant Shares which the Company has
been so requested to register by the Warrant Holders; provided that: (i) if the
registration involves an underwritten public offering, all Warrant Holders
requesting that their Warrant Shares be included in the Company's registration
statement must, upon request by the underwriter(s), sell their Warrant Shares to
such underwriter(s) selected by the Company or the security holders for whose
account the registration is being effected on the same terms and conditions as
apply to the Company or the selling security holders on whose account the
registration is being effected; and (ii) if a registration involves an
underwritten public offering, any Warrant Holders requesting to be included in
such registration may elect in writing at least ten (10) days prior to the
effective date of the registration statement filed in connection with such
registration, not to register any Warrant Shares thereunder. The Company shall
have the right to terminate or withdraw any registration initiated by it prior
to the effectiveness of the registration statement whether or not any Warrant
Holder has elected to include any Warrant Shares in the registration.
(c) Priority on Registration. Further, and notwithstanding the
------------------------
foregoing, if a registration involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the total
number of shares to be included in such registration, including the Warrant
Shares requested to be included pursuant to this Section 12, exceeds the maximum
----------
number of shares of Common Stock specified by the managing underwriter that may
be distributed without adversely affecting the price, timing or distribution of
such shares of Common Stock, then the Company shall include in such registration
only such maximum number of shares which, in the reasonable opinion of such
underwriter or underwriters can be sold in the following order of priority: (i)
first, all of the shares of Common Stock that the Company proposes to sell for
its own account or, in the case of a demand registration effected for the
account of
14
other security holders, all of the shares of Common Stock that such security
holders propose to sell for their own account, and (ii) second, the Warrant
Shares and all other shares requested to be included by other holders of Common
Stock (except those exercising a demand right) and, in the case of a demand
registration, all shares to be included for the account of the Company. To the
extent that shares of Common Stock to be included in the registration must be
allocated among the Warrant Holders and/or other security holders and/or the
Company, such shares shall be allocated pro rata among the Warrant Holders and
all other holders of Common Stock who requested inclusion in the registration
(except those holders, if any, exercising a demand right) and, in the case of a
demand registration, the Company, based upon the number of Warrant Shares or
other securities that such holders and/or the Company shall have requested be
included in the registration.
(d) Exception to Registration Rights. Notwithstanding the foregoing
--------------------------------
provisions of this Section 12, no Warrant Holder shall have the right to include
----------
Warrant Shares in a registration statement if the Warrant Shares may be sold by
the Warrant Holder without registration pursuant to the provisions of Rule
144(k) under the Securities Act.
SECTION 13. Notices to Warrant Holders. Upon any adjustment of the
--------------------------
Exercise Price pursuant to Section 10, the Company shall promptly thereafter (i)
----------
cause to be filed with the Company a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company (who may be the regular auditors of the Company) setting forth the
Exercise Price and the number of Warrant Shares after such adjustment, also
setting forth in reasonable detail the method of calculation and the facts upon
which such calculations are based, and also setting forth the number of Warrant
Shares (or portion thereof) issuable after such adjustment in the Exercise
Price, upon exercise of the Warrant and payment of the adjusted Exercise Price,
which certificate shall be conclusive evidence of the correctness of the matters
set forth therein, and (ii) cause to be given to each of the registered holders
of the Warrant Certificates at its address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such written notice may be given in advance and included as a part
of the notice required to be mailed under the other provisions of this
Section 13.
----------
In case:
(a) the Company shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase shares
of Common Stock or of any other subscription right, options or warrants; or
(b) the Company shall authorize the distribution to all holders of shares
of Common Stock of evidences of its indebtedness or assets (other than ordinary
cash dividends payable out of earnings or surplus and other than dividends
payable in shares
15
of Common Stock and other distributions referred to in subsection (a) of Section
10 hereof); or
(c) of any consolidation or merger to which the Company is a party and for
which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or of a tender offer or exchange offer for shares
of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company proposes to take any action (other than actions of the
character described in Section 10(a)) which would require an adjustment of the
--------------
Exercise Price pursuant to Section 10;
----------
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at its address appearing on the Warrant register, at
least twenty (20) days prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there is no record date,
by first-class mail or overnight courier, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 13 or any defect therein shall not affect the
----------
legality or validity of any distribution, right, option, warrant, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up, or the
vote upon any action.
Nothing contained in this Agreement or in any of the Warrant Certificates
shall be construed as conferring upon the holders thereof the right to vote or
to consent or to receive notice as shareholders in respect of the meetings of
shareholders or the election of Directors of the Company or any other matter, or
any rights whatsoever as shareholders of the Company.
SECTION 14. Notices to Company and to Warrant Holders. Any notice or
-----------------------------------------
demand authorized by this Agreement to be given or made by the registered holder
of any Warrant Certificate to or on the Company shall be sufficiently given or
made when
16
and if deposited in the mail, first class or registered, postage prepaid,
addressed to the office of the Company expressly designated by the Company as
its office for purposes of this Agreement (until the Warrant Holders are
otherwise notified in accordance with this Section 14 by the Company), as
----------
follows:
VelocityHSI, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Any notice pursuant to this Agreement to be given by the Company to the
registered holder(s) of any Warrant Certificates shall be sufficiently given
when and if deposited in the mail, first-class or registered, postage prepaid,
addressed (until the Company is otherwise notified in accordance with this
Section 14 by such holder) to such holder at the address appearing on the
Warrant register of the Company, which address shall initially be the address
appearing on the signature page hereof.
SECTION 15. Amendments, etc. The Company may not at any time supplement
---------------
or amend this Agreement without the prior written consent of the holder of the
Warrant Certificate.
SECTION 16. Successors. Each of the covenants and provisions of this
----------
Agreement by or for the benefit of each party hereto shall bind and inure to the
benefit of the successors in title and assigns of each of such party.
SECTION 17. Governing Law. This Agreement and each Warrant Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of California and for all purposes shall be construed in accordance with
the internal laws of the State of California.
SECTION 18. Benefits of This Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any person or corporation other than the Company and the
registered holders of the Warrant Certificates any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company and the registered holders of the Warrant
Certificates.
SECTION 19. Termination. This Agreement shall terminate on the Expiration
-----------
Date. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date if all Warrants have been exercised or redeemed.
SECTION 20. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original and all such counterparts shall together constitute but one and
the same instrument.
17
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]
18
IN WITNESS WHEREOF, the parties hereto have caused this WARRANT Agreement
to be duly executed as of the day and in the year first above written.
The Company:
-----------
VELOCITYHSI, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President, Chief
Financial Officer and Secretary
The Warrant Holder:
------------------
BANC OF AMERICA MORTGAGE
CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
21/st/ Floor
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
19
EXHIBIT A
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE PURSUANT TO THE TERMS OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NONE OF THEM MAY BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
EXERCISABLE ON OR BEFORE AUGUST 15, 2005
No. 1 450,000 Warrants
Warrant Certificate
VELOCITYHSI, INC.
This Warrant Certificate certifies that Banc of America Mortgage Capital
Corporation, or registered assigns, is the registered holder of Four Hundred
Fifty Thousand (450,000) Warrants expiring August 15, 2005 (the "Warrants") to
--------
purchase Common Stock, par value $0.01 per share (the "Common Stock"), of
------------
VelocityHSI, Inc., a Delaware corporation (the "Company"). Each Warrant
-------
entitles the holder upon exercise to receive from the Company on or before 5:00
p.m. Los Angeles Time on August 15, 2005 (the "Expiration Date"), one fully paid
---------------
and nonassessable share of Common Stock (a "Warrant Share") at the initial
-------------
exercise price (the "Exercise Price") of $1.20 payable in lawful money of the
--------------
United States of America upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office of the Company designated for such purpose,
but only subject to the conditions set forth herein and in the Warrant Agreement
referred to herein.
Notwithstanding the foregoing, Warrants may be exercised without the
exchange of funds pursuant to the net exercise provisions of Section 5 of the
---------
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement referred to herein.
No Warrant may be exercised after the Expiration Date, and to the
extent not exercised by such time such Warrants shall become void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Common Stock, and are issued pursuant to
a Warrant Agreement dated as of August 15, 2000 (the "Warrant Agreement"), duly
-----------------
executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the
A-1
rights, limitation of rights, obligations, duties and immunities thereunder of
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company.
Warrants may be exercised at any time on or before the Expiration Date
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
attached hereto properly completed and executed, together with payment of the
Exercise Price in cash at the office of the Company designated for such purpose.
In the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or, upon compliance with the
provisions of clause (iv) hereof, the holder's assignee, a new Warrant
-----------
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any
A-2
distribution to the holder(s) hereof, and for all other purposes, and the
Company shall not be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
Each new Warrant Certificate issued in the manner contemplated by this
Warrant Certificate and each certificate representing a Warrant Share or other
securities issued upon exercise of the Warrants represented by this Warrant
Certificate shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NONE OF THEM MAY BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
The holder of this Warrant Certificate, by acceptance hereof,
represents as follows:
(i) The Warrants have been acquired, and the Warrant Shares
issuable upon exercise of the Warrants (collectively the "Acquired Securities")
-------------------
will be acquired, for investment purposes only for the holder's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part of the Acquired Securities in contravention of applicable law, and the
holder has no present intention of selling, granting any participation in, or
otherwise distributing any of the Acquired Securities in contravention of
applicable laws. The holder does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or any third person with respect to any of the Acquired Securities.
(ii) The holder is, and upon the acquisition of the Acquired
Securities upon exercise of the Warrants will be, an "Accredited Investor"
within the meaning of Rule 501 of Regulation D of the Rules and Regulations of
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"). The holder has not been organized for the
--------------
purpose of acquiring the Acquired Securities.
(iii) The holder understands that the Acquired Securities it has
acquired or may acquire are "restricted securities" within the meaning of Rule
144 under the Securities Act ("Rule 144") inasmuch as they have been or will be
acquired from the Company in a transaction not involving a public offering and
that under the federal securities law and applicable regulations the Acquired
Securities may be resold without registration under the Securities Act only in
certain limited circumstances. In this connection, the holder represents that it
is familiar with Rule 144 and understands the resale limitations imposed thereby
and by the Securities Act. The holder acknowledges that its investment in the
Acquired Securities may be an illiquid investment requiring the holder to bear
the economic risk of the investment for an indefinite period.
A-3
(iv) Without in any way limiting the representation set forth
above, the holder agrees not to make any disposition of all or any portion of
the Acquired Securities unless and until the transferee has agreed in writing
for the benefit of the Company to be bound by the terms of this Warrant
(provided that the holder is making such disposition in a transaction other than
pursuant to Rule 144 or under an effective registration statement under the
Securities Act and in accordance with any applicable state securities laws), and
(a) the holder shall have notified the Company of the proposed disposition, and
(b) if requested by the Company, the holder shall have furnished to the Company
an opinion of counsel, in form and substance reasonably satisfactory to the
Company, rendered by a law firm experienced in matters involving the sale of
securities under federal and state securities laws, that such disposition will
not require registration of the Acquired Securities under the Securities Act or
registration or qualification under any state securities or "blue sky" law.
In the event certificates for Warrant Shares are delivered upon the
exercise of the Warrants, the Company may cause a legend or legends to be placed
on such certificates to make appropriate reference to the foregoing
representations and to restrict transfer of the Warrant Shares in the absence of
compliance with applicable federal or state securities laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its President and by its Secretary.
Dated: August 15, 2000.
VELOCITYHSI, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President, Chief
Financial Officer and Secretary
A-4
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ shares of Common
Stock and herewith tenders payment for each such share to the order of
VELOCITYHSI, INC. in the amount of $1.20 in accordance with the terms hereof,
unless the holder is exercising Warrants pursuant to the net exercise provisions
of Section 5 of the Warrant Agreement. The undersigned requests that a
---------
certificate for such shares be registered in the name of the undersigned, and
that such shares be delivered to the following address:
______________________________________. If said number of shares is less than
all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
such shares be registered in the name of the undersigned and that such Warrant
Certificate be delivered to the following address:
________________________________________.
Signature:
Date: _______________ _______________________