EXHIBIT 4.2
WARRANT TO PURCHASE COMMON STOCK
(CONVERSION WARRANTS)
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED NEITHER THE WARRANT NOR THE SHARES MAY 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
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION
PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT
OR THE SHARES ISSUABLE HEREUNDER.
Issuer: SonicPort, Inc.
Class of Stock: Common Stock
Issue Date: March 29, 2002
Expiration Date: March 29, 2005
THIS WARRANT TO PURCHASE COMMON STOCK is being issued pursuant to that
certain Securities Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") between SonicPort, Inc., a Nevada corporation (the "Company") and La
Jolla Cove Investors, Inc. ("Holder").
The Company hereby grants to Holder the right to purchase that number of
shares of the Company's Common Stock (the "Shares" or "Warrant Shares") equal to
ten (10) times the number of shares of Common Stock issued to Holder from time
to time pursuant to the conversion of the Debenture (as such term is defined in
the Purchase Agreement). If the Debenture is redeemed by the Company, the number
of shares that the Holder shall have the right to purchase hereunder shall be
computed and fixed on the date of the redemption as if the Holder had converted
the entire remaining Principal Amount of the Debenture on the redemption date.
For avoidance of doubt, this Warrant may be exercised only concurrently with or
subsequent to the issuance of a Conversion Notice or a notice of redemption
under the Debenture. The date that the Holder issues a Conversion Notice is
hereafter referred to as the "Conversion Date." Defined terms not defined herein
shall have the meanings ascribed to them in the Debenture or the Purchase
Agreement.
This Warrant shall expire and Holder shall no longer be able to purchase
the Warrant Shares on March 29, 2005.
ARTICLE I
EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
duly executed Warrant Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company, along with a check payable to
the Company for the aggregate Exercise Price for the Shares being purchased.
1.2 Delivery of Certificate and New Warrant. As promptly as practicable
after the receipt of the Warrant Notice of Exercise, but in any event not more
than three (3) Business Days after the Company's receipt of the Warrant Notice
of Exercise, the Company shall issue the Shares and cause to be mailed for
delivery by overnight courier, or if a Registration Statement covering the
Shares has been declared effective by the SEC cause to be electronically
transferred, to Holder a certificate representing the Shares acquired and, if
this Warrant has not been fully exercised and has not expired, a new Warrant
substantially in the form of this Warrant representing the right to acquire the
portion of the Shares not so acquired.
1.3 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, or 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.
1.4 Exercise Price.
(a) Prior to Debenture Redemption. If the Debenture has not been
redeemed, the Exercise Price of this Warrant shall be the lesser of (a) one
hundred twenty-five percent (125%) of the Market Price on the Trading Day prior
to the Closing Date; or (b) seventy-six percent (76%) of the lowest Market Price
during the thirty (30) Trading Days prior to Holder's election to exercise
("Discount Multiplier"), provided, that in the event that the Registration
Statement has not been declared effective by the SEC by the Deadline, then the
Discount Multiplier shall decrease by three percent (3%) for each month or
partial month occurring after the Deadline that the Registration Statement has
not been declared effective by the SEC; or (c) the price paid to convert the
corresponding portion of the Debenture.
(b) Following Debenture Redemption. If the Debenture has been
redeemed, the Exercise Price of this Warrant shall be determined as follows:
(i) For a period of 6 months from the date of the
Debenture redemption, the Exercise Price shall be the Exercise Price on the date
of redemption, as computed under subsection (a) above.
(ii) After 6 months from the date of the Debenture
redemption: (x) if the closing price of the Common Shares on the date of
exercise is less than the closing price of the Common Shares on the redemption
date, the Exercise Price shall be the lesser of the Exercise Price on the date
of redemption or the Exercise Price on the date of exercise, both as computed
under subsection (a) above; (y) if the closing price of the Common Shares on the
date of exercise
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is higher than the closing price of the Common Shares on the redemption date,
the Exercise Price shall be the Exercise Price on the date of redemption, as
computed under subsection (a) above.
ARTICLE II
ADJUSTMENT TO THE SHARES
The number of Shares purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment form time to time upon the
occurrence of certain events, as follows:
2.1 Reclassification. In case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant then,
and in any such case, the Holder, upon the exercise hereof at any time after the
consummation of such reclassification or change, shall be entitled to receive in
lieu of each Share theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and/or property received
upon such reclassification or change by a holder of one Share. The provisions of
this Section 2.1 shall similarly apply to successive reclassifications or
changes.
2.2 Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Shares, the Exercise Price shall be proportionately decreased in the case of
a subdivision or increased in the case of a combination.
2.3 Stock Dividends. If the Company, at any time while this Warrant is
outstanding shall pay a dividend with respect to its Shares payable in Shares,
or make any other distribution of Shares with respect to Shares (except any
distribution specifically provided for in Section 2.1 and Section 2.2 above),
then the Exercise Price shall be adjusted, effective from and after the date of
determination of shareholders entitled to received such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction, (a) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution.
2.4 Non-Cash Dividends. If the Company at any time while this Warrant is
outstanding shall pay a dividend with respect to Shares payable in securities
other than Shares or other non-cash property, or make any other distribution of
such securities or property with respect to Shares (except any distribution
specifically provided for in Section 2.1 and Section 2.2 above), then this
Warrant shall represent the right to acquire upon exercise of this Warrant such
securities or property which a holder of Shares would have been entitled to
receive upon such dividend or distribution, without the payment by the Holder of
any additional consideration for such securities or property.
2.5 Effect of Reorganization and Asset Sales. If any (i) reorganization
or reclassification of the Common Stock (ii) consolidation or merger of the
Company with or into another corporation, or (iii) sale or all or substantially
all of the Company's operating assets to another corporation followed by a
liquidation of the Company (any such transaction shall be followed by a
liquidation of the Company (any such transaction shall be referred to herein as
an
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"Event", is effected in such a way that holders of common Stock are of Common
Stock are entitled to receive securities and/or assets as a result of their
Common Stock ownership, the Holder, upon exercise of this Warrant, shall be
entitled to receive such shares of stock securities or assets which the Holder
would have received had it fully exercised this Warrant on or prior the record
date for such Event. The Company shall not merge into or consolidate with
another corporation or sell all of its assets to another corporation for a
consideration consisting primarily of securities or such corporation, unless the
successor or acquiring corporation, as the case may be, shall expressly assume
the due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed or observed by the Company and all of
the obligations and liabilities hereunder, subject to such modification as shall
be necessary to provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 2. The foregoing
provisions shall similarly apply to successive mergers, consolidations or sales
of assets.
2.6 Adjustment of Number of Shares. Upon each adjustment in the Exercise
Price, the number of Shares shall be adjusted, to the nearest whole share, to
the product obtained by multiplying the number of Shares, purchasable
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price immediately thereafter.
2.7 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 all of the provisions of this Warrant and
in taking all such action as may be reasonably necessary or appropriate to
protect ▇▇▇▇▇▇'s rights hereunder against impairment. If the Company takes any
action affecting its Common Stock other than as described above that adversely
affects Holder's rights under this Warrant, the Exercise 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 Exercise Price of this
Warrant is unchanged.
2.8 Fractional Shares. No fractional Shares shall be issuable upon the
exercise of this Warrant, and the number of Shares to be issued shall be rounded
down to the nearest whole Share.
2.9 Certificate as to Adjustments. Upon any adjustment of the Exercise
Price, the Company, at its expense, shall 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 Exercise
Price in effect upon the date thereof and the series of adjustments leading to
such Exercise Price.
2.10 No Rights of Shareholders. This Warrant does not entitle Holder to
any voting rights or any other rights as a shareholder of the Company prior to
the exercise of ▇▇▇▇▇▇'s right to purchase Shares as provided herein.
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ARTICLE III
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby represents and
warrants to Holder that all Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonasessable, and free of any liens
and encumbrances.
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 fights;
(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 Holder holds this Warrant and/or any
of the Shares, the company shall deliver to Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days of their availability, the annual audited
financial statements of the Company certified by independent public accountants
of recognized standing, and (c) within forty-five (45) days after the end of
each fiscal quarter or each fiscal year, the Company's quarterly, unaudited
financial statements.
3.4 Reservation of Warrant Shares. The Company has reserved and will
keep available, out of the authorized and unissued shares of Common Stock, the
full number of shares sufficient to provide for the exercise of the rights of
purchase represented by this Warrant.
3.5 Registration Rights. If Holder exercises this Warrant and purchases
some or all of the Shares, Holder shall have the Registration Rights set forth
in that certain Registration Rights Agreement executed concurrently therewith.
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ARTICLE IV
REPRESENTATIONS AND COVENANTS OF THE HOLDER
4.1 Investment Purpose. ▇▇▇▇▇▇'s right to acquire Shares is being
acquired for investment and not with a view to the sale or distribution of any
part thereof, and Holder has no present intention of selling or engaging in any
public distribution of the same except pursuant to a registration or exemption.
4.2 Private Issue. Holder understands (i) that the Shares issuable upon
exercise of ▇▇▇▇▇▇'s rights contained in the Warrant are not registered under
the Act or qualified under applicable state securities laws on the ground that
the issuance contemplated by the Warrant will be exempt from the registration
and qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on Holder's representations set forth in this
Article 4.
4.3 Financial Risk. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
4.4 Risk of No Registration. Holder understands that if the Company does
not register with the Securities and Exchange Commission pursuant to Section 12
of the Act, or file reports pursuant to Section 15(d), of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the Act is not in effect when it desires to sell (i) the
right to purchase Shares pursuant to the Warrant, or (ii) the Shares issuable
upon exercise of the right to purchase, it may be required to hold such
securities for an indefinite period.
4.5 Accredited Investor. Holder is an "accredited investor," as such
term is defined in Regulation D promulgated pursuant to the Act.
ARTICLE V
MISCELLANEOUS
5.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or after the Conversion Date and on or before the
Expiration Date set forth above.
5.2 Compliance with Securities Laws on Transfer. This Warrant 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 pinions reasonably satisfactory to the Company, as reasonably
requested by the Company) and without the prior written consent of Company,
which consent shall not be unreasonably withheld, provided that Holder shall
have the right without the consent of the Company to transfer or assign in whole
or in part this Warrant and the Shares issuable upon exercise this Warrant to
any of Holder's affiliates, successors, assigns or the United States Federal
Reserve Board. The Company shall not require Holder to provide an opinion of
counsel if the transfer is to an affiliate of Holder.
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5.3 Transfer Procedure. ▇▇▇▇▇▇ agrees that unless there is in effect a
registration statement under the Act covering the proposed transfer of all or
part of this Warrant, prior to any such proposed transfer the Holder shall give
written notice thereof to the Company (a "Transfer Notice"). Each Transfer
Notice shall describe the manner and circumstances of the proposed transfer in
reasonable detail and, if the company so requests, shall be accompanied by an
opinion of legal counsel, in a form reasonably satisfactory to the Company, to
the effect that the proposed transfer may be effected without registration under
the Act; provided that the Company will not require opinions of counsel for
transactions involving transfers to affiliates or pursuant to Rule 144
promulgated by the Securities and Exchange Commission under the act, except in
unusual circumstances.
5.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by telecopier machine or by a nationally recognized overnight courier
service, and shall be deemed given when so delivered personally, or by
telecopier machine or overnight courier service as follows:
if to the Company, to:
SonicPort, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
if to the Holder, to:
La Jolla Cove Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as the Company shall have furnished to the Holder. Each
such notice or other communication shall for all purposes of this agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or five days
after the same has been deposited in a regularly maintained receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid.
5.5 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. Facsimile execution shall be deemed originals.
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5.6 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.
5.7 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.
5.8 Governing Law; Jurisdiction. 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. Each of the parties hereto
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of San Diego or the state courts of the State of California
sitting in the City of San Diego in connection with any dispute arising under
this Warrant and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant to
Purchase Common Stock to be executed and delivered on the date first above
written.
SonicPort, Inc. La Jolla Cove Investors, Inc.
By: By:
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Title: Title:
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APPENDIX 1
WARRANT NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _____ shares of the Common
Stock of SonicPort, Inc. pursuant to the terms of the Warrant to Purchase Common
Stock issued by SonicPort, Inc. on March 29, 2002 and tenders herewith payment
of the purchase price of such shares in full.
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:
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(Name and Address)
3. The undersigned makes the representations and covenants set forth in
Article 4 of the Warrant to Purchase Common Stock.
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(Signature)
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(Date)
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