EXHIBIT 99(iv)
WARRANT TO PURCHASE COMMON STOCK
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: The X-Change Corporation
Class of Stock: Common Stock
Issue Date: August 29, 2007
Expiration Date: August 29, 2010
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") by and between The X-Change Corporation, a Nevada corporation (the
"Company"), to La Jolla Cove Investors, Inc. ("Holder").
ARTICLE 1
DESCRIPTION OF WARRANTS
-----------------------
1.1 WARRANTS. The Company hereby grants to Holder the right to
purchase 2,500,000 shares of the Company's Common Stock (the "Shares" or
"Warrant Shares") at a price per share equal to the Exercise Price set forth in
section 2.4 below. Subject to the terms and limitations set forth in the
Debenture, upon each conversion of any portion of the Principal Amount
outstanding under the Debenture, Holder shall be required to simultaneously
exercise a percentage of this Warrant that is equal to the percentage of the
Principal Amount of the Debenture being so converted by ▇▇▇▇▇▇. For purposes of
illustration only, if the Purchase Price of the Debenture is equal to $250,000,
and the Holder elects to convert $2,500 of the Principal Amount of the
Debenture, Holder would simultaneously with such conversion purchase 25,000
Warrant Shares under the terms of this Warrant. The date that the Holder issues
a Conversion Notice under the Debenture is hereafter referred to as the
"Conversion Date." Capitalized terms not defined herein shall have the meanings
ascribed to them in the Debenture or the Purchase Agreement.
1.2 EXPIRATION OF WARRANTS. This Warrant shall expire and
Holder shall no longer be able to purchase the Warrant Shares on the Expiration
Date.
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ARTICLE 2
EXERCISE
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2.1 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 (the "Warrant Notice of Exercise") to the principal
office of the Company.
2.2 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 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.
2.3 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.
2.4 EXERCISE PRICE. The Exercise Price of this Warrant shall
be $1.00 per Share.
2.5 CERTAIN EXERCISE LIMITS. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, to the extent that after giving effect to the exercise,
as set forth on the applicable Warrant Notice of Exercise, such Holder (together
with such ▇▇▇▇▇▇'s Affiliates, and any other person or entity acting as a group
together with such Holder or any of such ▇▇▇▇▇▇'s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by such Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which such determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (A) exercise of the remaining,
unexercised amount of this Warrant beneficially owned by such Holder or any of
its Affiliates and (B) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein (including,
without limitation, any other debentures or warrants to purchase shares of the
Company's Common Stock) beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 2.5, beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
To the extent that the limitation contained in this Section 2.5 applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder together with any Affiliates) and of which
amount of this Warrant is exercisable shall be in the sole discretion of such
Holder, and the submission of a Warrant Notice of Exercise shall be deemed to be
such Holder's determination of whether this Warrant may be exercised (in
relation to other securities owned by such Holder together with any Affiliates)
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and which amount of this Warrant is exercisable, in each case subject to such
aggregate percentage limitations. To ensure compliance with this restriction,
each Holder will be deemed to represent to the Company each time it delivers a
Warrant Notice of Exercise that such Warrant Notice of Exercise has not violated
the restrictions set forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 2.5, in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock provided to the Holder in
writing by the Company after Holder makes such request or in the event that the
Company files, any of the following with the Securities and Exchange Commission,
the most recent of the following: (A) the Company's most recent Form 10-QSB or
Form 10-KSB, as the case may be, (B) a more recent public announcement by the
Company; or (C) a more recent notice by the Company or the Company's transfer
agent setting forth the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding on the records of the Company as of the date of the
request. In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities of
the Company, including this Warrant, by such Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock was reported.
The "Beneficial Ownership Limitation" shall be 4.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of this Warrant held by the
Holder. The Beneficial Ownership Limitation provisions of this Section 2.5 may
be waived by such Holder, at the election of such Holder, upon not less than 61
days' prior notice to the Company, to, at the sole discretion of the Holder,
either change the Beneficial Ownership Limitation to (i) 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of the Warrant held by the
Holder and the provisions of this Section 2.5 shall continue to apply, or (ii)
remove any Beneficial Ownership Limitation under this Warrant. The provisions of
this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2.5 to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
If any court of competent jurisdiction shall determine that the foregoing
limitation is ineffective to prevent a Holder from being deemed the beneficial
owner of more than 9.99% of the then outstanding shares of Common Stock, then
the Holder shall not have the right to exercise such portion of this Warrant as
shall cause such Holder not to be deemed the beneficial owner of more than 9.99%
of the then outstanding shares of Common Stock. Upon such determination by a
court of competent jurisdiction, the Holder shall have no interest in or rights
under such portion of the Warrant. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant.
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ARTICLE 3
ADJUSTMENT TO THE SHARES
------------------------
The number of Shares purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
3.1 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 3.1 shall similarly apply to successive
reclassifications or changes.
3.2 SUBDIVISION OR COMBINATION OF SHARES. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Shares, or declare a dividend to be paid in cash, the Exercise Price
shall be proportionately decreased in the case of a subdivision or payment of
cash dividend or increased in the case of a combination.
3.3 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 3.1 and Section
3.2 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.
3.4 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 3.1 and Section 3.2 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.
3.5 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 referred
to herein as an "Event"), is effected in such a way that holders 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
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consisting primarily of securities of 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 3. The foregoing
provisions shall similarly apply to successive mergers, consolidations or sales
of assets.
3.6 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 by a fraction, the numerator of which shall
be the Exercise Price immediately prior to such adjustment and the denominator
of which shall be the Exercise Price immediately thereafter.
3.7 NO IMPAIRMENT. The Company shall not, by amendment of its
articles or certificate 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 Holder'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.
3.8 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.
3.9 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.
3.10 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.
ARTICLE 4
REPRESENTATIONS AND COVENANTS OF THE COMPANY
--------------------------------------------
4.1 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.
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4.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any
time (a) to declare any dividend or distribution upon its Common Stock, whether
in cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of Common
Stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the Company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of Common Stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of Common
Stock will be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
4.3 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.
4.4 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.
ARTICLE 5
REPRESENTATIONS AND COVENANTS OF THE HOLDER
-------------------------------------------
5.1 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 5.
5.2 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.
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5.3 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.
5.4 ACCREDITED INVESTOR. Holder is an "accredited investor,"
as such term is defined in Regulation D promulgated pursuant to the Act.
ARTICLE 6
MISCELLANEOUS
-------------
6.1 TERM. This Warrant is exercisable, in whole or in part, at
any time and from time to time on or after the Issue Date and on or before the
Expiration Date set forth above.
6.2 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 opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate of
Holder.
6.3 TRANSFER PROCEDURE. 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 of this Warrant. ▇▇▇▇▇▇ 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.
6.4 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:
The X-Change Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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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.
6.5 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.
6.6 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.
6.7 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.
6.8 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.
6.9 REMEDIES. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transactions hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Warrant will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Warrant, that the
Holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Warrant and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.
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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.
The X-Change Corporation La Jolla Cove Investors, Inc.
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------- --------------------------
Title: CHIEF OPERATING OFFICER Title: PORTFOLIO MANAGER
--------------------------- -----------------------
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APPENDIX 1
WARRANT NOTICE OF EXERCISE
--------------------------
1. The undersigned hereby elects to purchase _____ shares of the Common
Stock of The X-Change Corporation pursuant to the terms of the Warrant to
Purchase Common Stock issued to La Jolla Cove Investors, Inc. on August 29,
2007.
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:
La Jolla Cove Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
3. The undersigned makes the representations and covenants set forth in
Article 5 of the Warrant to Purchase Common Stock.
________________________________
(Signature)
___________________________
(Date)
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