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EXHIBIT 10.7
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
WARRANT TO PURCHASE SERIES C PREFERRED STOCK
OF
NEXTRON COMMUNICATIONS, INC.
This Warrant (the "Warrant") is issued to Security Capital Trading, Inc.
or its registered assigns ("Holder") by Nextron Communications, Inc., a
California corporation (the "Company"), on March 8, 2000 (the "Warrant Issue
Date") for the consideration stated in the Warrant Purchase Agreement ("Warrant
Purchase Agreement") dated of even date herewith, receipt of which is hereby
acknowledged.
1. Purchase Shares. Subject to the terms and conditions hereinafter set
forth, the Holder is entitled, upon surrender of this Warrant at the principal
office of the Company (or at such other place as the Company shall notify the
Holder hereof in writing), to purchase from the Company two-hundred fifty
thousand (250,000) shares of Series C Preferred Stock of the Company (the
"Warrant Shares" or "Preferred Stock") at the Exercise Price (defined below),
subject to adjustment as provided in Section 8 below.
2. Exercise Price. The exercise price for the Warrant Shares shall be
$4.80 per Warrant Share, as adjusted from time to time pursuant to Section 8
hereof (the "Exercise Price").
3. Exercise Period. This Warrant shall be exercisable, in whole or in
part, during the term commencing one year from the Warrant Issue Date and ending
on the earlier of (i) the fifth anniversary of the date hereof, (ii) 180 days
after closing of the sale and issuance of Common Stock of the Company in a
firmly underwritten initial public offering, pursuant to an effective
registration under the Securities Act of 1933, as amended, with gross proceeds
to the Company of at least $15,000,000 (the "Initial Public Offering") or (iii)
immediately preceding a Change of Control. The term "Change of Control" shall
mean (a) the acquisition of the Company pursuant to a consolidation of the
Company with or merger of the Company with or into any other person in which the
Company is not the surviving corporation (other than a reincorporation); (ii)
the sale of all or substantially all of the assets of the company to any other
person. In the event of a Change of Control, the Company shall provide the
Holder with thirty (30) days' prior written notice of the event constituting the
Change of Control. Further, in the event of a Change of Control whereby (i) the
consideration to be received by Holder in the event of Change of Control in
respect of the Series C Preferred Stock exceeds the exercise price of the
Warrant, and (ii) Holder has not notified the Company of Holder's intent to
exercise the Warrant within the 30 days' notice provision contained in this
Section 3, then, the Warrant shall be deemed automatically exercised as of the
closing of the event constituting the Change of Control pursuant to provisions
of Section 5 hereof.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly executed
copy of the form of Notice of Exercise attached hereto, to the Secretary
of the Company at its principal offices; and
(b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Warrant Shares being
purchased.
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5. Net Exercise. In lieu of exercising this Warrant pursuant to Section
4, the Holder may elect to receive, without the payment by the Holder of any
additional consideration, Warrant Shares equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the Notice of Exercise attached
hereto indicating such election, in which event the Company shall issue to the
Holder hereof a number of Warrant Shares computed using the following formula:
Y(A-B)
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X = A
Where: X = The number of Warrant Shares to be issued to the Holder
pursuant to this net exercise;
Y = The number of Warrant Shares in respect of which the net
issue election is made;
A = The fair market value of one Warrant Share at the time
the net issue election is made;
B = The Exercise Price (as adjusted to the date of the
net issuance).
For purposes of this Section 5, the fair market value of one Warrant Share as of
a particular date shall be determined as follows: (i) if traded on a securities
exchange or through the Nasdaq National Market, the value shall be deemed to be
the closing price of the securities on such exchange on the date of the exercise
of the Warrants; (ii) if traded over-the-counter, the value shall be deemed to
be the average of the closing bid or sale prices (whichever is applicable) over
the thirty (30) day period ending three (3) days prior to the net exercise; and
(iii) if there is no active public market, the value shall be the fair market
value thereof, as determined in good faith by the Board of Directors of the
Company; provided, that, if the Warrant is being exercised upon the closing of
the Initial Public Offering, the value will be the initial "Price to Public" of
the number of shares of Common Stock into which each Warrant Share is
convertible as specified in the final prospectus with respect to such offering.
6. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Warrant
Shares so purchased shall be issued as soon as practicable thereafter (with
appropriate restrictive legends, if applicable), and in any event within thirty
(30) days of the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Warrant Shares,
when issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
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8. Adjustment of Exercise Price and Kind and Number of Shares. The
number and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time prior to the expiration of this Warrant (i)
subdivide its Common Stock, by split-up or otherwise, or combine its
Common Stock, (ii) issue additional shares of its Common Stock or other
equity securities as a dividend with respect to any shares of its Common
Stock, or (iii) declare a cash dividend with respect to any shares of
its Common Stock, the number of shares of Common Stock issuable on the
exercise of this Warrant shall forthwith be proportionately increased in
the case of a subdivision or stock or cash dividend, or proportionately
decreased in the case of a combination. Appropriate adjustments shall
also be made to the purchase price payable per share, but the aggregate
purchase price payable for the total number of Warrant Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 8(a) shall become effective at the close
of business on the date the subdivision or combination becomes
effective, or as of the record date of such dividend, or in the event
that no record date is fixed, upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case
of any reclassification, capital reorganization, or change in the Common
Stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 8(a) above),
then, as a condition of such reclassification, reorganization, or
change, lawful provision shall be made, and duly executed documents
evidencing the same from the Company or its successor shall be delivered
to the Holder, so that the Holder shall have the right at any time prior
to the expiration of this Warrant to purchase, at a total price equal to
that payable upon the exercise of this Warrant (subject to adjustment of
the Exercise Price as provided in Section 8, the kind and amount of
shares of stock and other securities and property receivable in
connection with such reclassification, reorganization, or change by a
Holder of the same number of shares of Common Stock as were purchasable
by the Holder immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall
be made with respect to the rights and interest of the Holder so that
the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon
exercise hereof, and appropriate adjustments shall be made to the
purchase price per share payable hereunder, provided the aggregate
purchase price shall remain the same.
(c) Notice of Adjustment. When any adjustment is required to be
made in the number or kind of shares purchasable upon exercise of the
Warrant, or in the Exercise Price, the Company shall promptly notify the
Holder of such event and of the number of shares of Common Stock or
other securities or property thereafter purchasable upon exercise of
this Warrant.
(d) Conversion of Preferred Shares. Should all of the Preferred
Stock outstanding or any portion there outstanding at any time prior to
the expiration of this Warrant be converted into shares of Common Stock,
then this Warrant shall immediately be exercisable for that number of
shares of Common Stock equal to the number of shares of Common Stock
that would have been received if this Warrant had been exercised in full
and the Preferred Stock received thereupon had been simultaneously
converted immediately prior to such event, and the Exercise Price shall
be immediately adjusted to equal to the quotient maintained by dividing
(x) the aggregate exercise price of the maximum number of shares of
Preferred Stock for which this Warrant was exercisable immediately prior
to such conversion by (y) the number of shares of Common Stock for which
this Warrant is exercisable immediately after such conversion.
(e) Issuance of New Warrant. Upon the occurrence of any of the
events listed in this Section 8 that results in an adjustment of the
type, number or exercise price of the securities underlying this
Warrant, the Holder shall have the right to receive a new warrant
reflecting such adjustment upon the Holder tendering this Warrant in
exchange. The new warrant shall otherwise have terms identical to this
Warrant.
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9. Covenants and Conditions.
(a) No Impairment. Pursuant to the terms and conditions of this
Warrant, Company shall: (i) reserve an appropriate number of shares of
Company's Common Stock to facilitate the issuance of Warrant Shares to
Holder pursuant to this Warrant, (ii) not amend its articles or take any
other action that would materially impair Company's ability to comply
with the terms of the Warrant or otherwise unfairly impair the rights of
the Holder, and (iii) provide Holder with reasonable notice before
Company undertakes any significant corporate action that would have a
material impact upon Holder's rights under the Warrant or upon the
rights of the holders of Common Stock or Preferred Stock generally.
(b) Registration Rights. The Company shall grant the Holder
registration rights identical to those granted to the purchasers of the
Series C Preferred Stock pursuant to the Investors' Rights Agreement
between the Company and certain purchasers of the Company's Series B
Preferred Stock and Series C Preferred Stock dated February 25, 2000.
10. Representations and Warranties. Pursuant to the terms and conditions
of this Warrant, Company represents and warrants that Company is: (i) properly
organized and structured pursuant to all applicable corporate laws of the State
of California, (ii) not in violation of any applicable laws, ordinances or
contracts, where such violation would have a material adverse effect on Holder's
rights under this Warrant, and (iii) under the belief that all financial
statements or other material representations made to Holder are complete and
accurate.
11. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
12. No Stockholder Rights. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights of a stockholder with respect to the shares
of Preferred Stock issuable on the exercise hereof, including (without
limitation) the right to vote such shares of Preferred Stock, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
nothing in this Section 12 shall limit the right of the Holder to be provided
the Notices required under this Warrant.
13. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holder
and their respective successors and assigns.
14. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder. Any waiver or amendment affected
in accordance with this Section shall be binding upon each holder of any shares
of Preferred Stock purchased under this Warrant at the time outstanding
(including securities into which such shares have been converted), each future
holder of all such shares, and the Company.
15. Notices. All notices required under this Warrant shall be deemed to
have been given or made for all purposes (i) upon personal delivery, (ii) upon
confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company
shall notify the Holder hereof in writing). Notices to the Holder shall be sent
to the address of the Holder on the books of the Company (or at such other place
as the Holder shall notify the Company hereof in writing).
16. Attorneys' Fees. If any action at law or equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
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17. Captions. The section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
18. Governing Law. This Warrant shall be governed by the laws of the
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
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IN WITNESS WHEREOF, Nextron Communications, Inc. caused this Warrant to
be executed by an officer thereunto duly authorized.
NEXTRON COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Address: ▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇, #▇▇▇
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NOTICE OF EXERCISE
To:
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The undersigned hereby elects to [check applicable subsection]:
----------- (a) Purchase __________ shares of Series C Preferred Stock
of Nextron Communications, Inc., pursuant to the terms
of the attached Warrant and payment of the Exercise
Price per share required under such Warrant accompanies
this notice;
OR
---------- (b) Exercise the attached Warrant for [all of the shares]
[__________ of the Shares] [cross out inapplicable
phrase] of Series C Preferred Stock of Nextron
Communications, Inc. purchasable under the Warrant
pursuant to the net exercise provisions of Section 5 of
such Warrant.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
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By:
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[NAME]
Address:
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Date:
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Name in which shares should be registered:
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