THIS WARRANT AND THE SHARES OF CAPITAL STOCK ISSUED UPON ANY EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED BY ANY PERSON, INCLUDING A PLEDGEE, UNLESS (1) EITHER
(A) A REGISTRATION WITH RESPECT TO THERETO SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT, OR (B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT IS AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
No. W2/04- For the Purchase
of _________ shares
of Common Stock
WARRANT TO PURCHASE STOCK
OF
CONNECTIVCORP
(A DELAWARE CORPORATION)
CONNECTIVCORP, a Delaware corporation (the "COMPANY"), for value
received, hereby certifies that __________ (the "HOLDER"), is entitled, subject
to the terms set forth below, to purchase from the Company, at any time or from
time to time at or before the earlier of 5:00 p.m. New York City time on
February 24, 2007 (the "EXPIRATION DATE") and the termination of this Warrant as
provided in Section 8 hereof, _________ shares of Common Stock, par value $0.001
per share, of the Company (the "COMMON STOCK"), at a purchase price per share
equal to one dollar($1.00) per share (the "BASE PRICE"), as adjusted upon the
occurrence of certain events as set forth in Section 3 of this Warrant. The
shares of stock issuable upon exercise of this Warrant, and the purchase price
per share, are hereinafter referred to as the "Warrant Stock" and the "Purchase
Price," respectively.
1. Exercise.
1.1 Manner of Exercise; Payment in Cash. This Warrant may be
exercised by the Holder, in whole or in part, by surrendering this
Warrant, with the purchase form appended hereto as Exhibit A duly
executed by the Holder, at the principal office of the Company, or at
such other place as the Company may designate, accompanied by payment
in full of the Purchase Price payable in respect of the number of
shares of Warrant Stock purchased upon such exercise; provided, that,
the Holder may not exercise any part of this Warrant unless and until
the Company has filed an amendment to the Company's Certificate of
Incorporation increasing the amount of its authorized shares of Common
Stock to allow for the exercise of this Warrant and such amendment has
been effectively filed (the "Filing Date"). Payment of the Purchase
Price shall be in cash or by certified or official bank check payable
to the order of the Company.
1.2 Effectiveness. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business
on the day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1 above. At such time, the person or
persons in whose name or names any certificates for Warrant Stock shall
be issuable upon such exercise as provided in Section 1.3 below shall
be deemed to have become the holder or holders of record of the Warrant
Stock represented by such certificates.
1.3. Delivery of Certificates. As soon as practicable after
the exercise of this Warrant in full or in part, and in any event
within ten (10) business days thereafter, the Company at its sole
expense will cause to be issued in the name of, and delivered to, the
Holder, or, subject to the terms and conditions hereof, as such Holder
(upon payment by such Holder of any applicable transfer taxes) may
direct:
(a) A certificate or certificates for the number of
full shares of Warrant Stock to which such Holder shall be
entitled upon such exercise plus, in lieu of any fractional
share to which such Holder would otherwise be entitled, cash
in an amount determined pursuant to Section 2 hereof, and
(b) In case such exercise is in part only, a new
warrant or warrants (dated the date hereof) of like tenor,
calling in the aggregate on the face or faces thereof for the
number of shares of Warrant Stock (without giving effect to
any adjustment therein) equal to the number of such shares
called for on the face of this Warrant minus the number of
such shares purchased by the Holder upon such exercise as
provided in Section 1.1 above.
1.4 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. Subject to Section 8, in addition to and
without limiting the rights of the holder under the terms of this
Warrant, the holder shall have the right to convert this Warrant or any
portion thereof (the "Conversion Right") into shares of Common Stock as
provided in this Section 1.4 at any time or from time to time during
the term of this Warrant. Notwithstanding anything contained in this
Warrant to the contrary, only in the event a registration statement
under the Securities Act providing for the resale of the Warrant Stock
is not then in effect, in lieu of exercising this Warrant by payment of
cash, the holder may exercise this Warrant by a cashless exercise in
accordance with the provisions of this Section 1.4. Upon exercise of
the Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the Company
shall deliver to the holder (without payment by the holder of any
Purchase Price or any cash or other consideration) that number of
shares of fully paid and nonassessable Common Stock equal to the
quotient obtained by dividing (X) the value of this Warrant (or the
specified portion hereof) on the Conversion Date (as defined in
subsection (b) hereof), which value shall be determined by subtracting
(A) the aggregate Purchase Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the
aggregate fair market value of the Converted Warrant Shares issuable
upon exercise of this Warrant (or the specified
-2-
portion hereof) on the Conversion Date (as herein defined) by (Y) the
fair market value of one share of Common Stock on the Conversion Date
(as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B-A
---
Y
where: X = the number of shares of Common Stock that may be
issued to holder
Y = the fair market value (FMV) of one share of Common Stock
A = the aggregate Warrant Price (Converted Warrant Shares x
Purchase Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in
accordance with the foregoing formula is other than a whole number, the
Company shall pay to the holder an amount in cash equal to the fair
market value of the resulting fractional share of the Conversation Date
(as herein defined).
(b) Method of Exercise. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office
of the Company together with the Subscription Form in the form attached
hereto duly completed and executed and indicating the number of shares
subject to this Warrant which are being surrendered (referred to in
Section 1.4(a) hereof as the Converted Warrant Shares) in exercise of
the Conversion Right. Such conversion shall be effective upon receipt
by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be
made contingent upon the occurrence of any of the events specified in
Section 8. Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new Warrant evidencing the
balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder
within thirty (30) days following the Conversion Date.
(c) Determination of Fair Market Value. For purposes of this
Section 1.4(c), "fair market value" of a share of Common Stock as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with
and contingent upon a public offering, and if the Company's
Registration Statement relating to such public offering ("Registration
Statement") has been declared effective by the SEC, then the initial
"Price to Public" specified in the final prospectus with respect to
such offering.
-3-
(ii) If the Conversion Right is not exercised in connection
with and contingent upon a public offering, then as follows:
(1) If traded on a securities exchange, the fair market
value of the Common Stock shall be deemed to be the
average of the closing prices of the Common Stock on
such exchange over the five-day period ending one
business day prior to the Determination Date or, if
less, such number of days as the Common Stock has
been traded on such exchange;
(2) If traded over-the-counter, the fair market value of
the Common Stock shall be deemed to be the average of
the closing bid prices of the Common Stock over the
five-day period ending one business day prior to the
Determination Date or, if less, such number of days
as the Common Stock has been traded over-the-counter;
and
(3) If there is no public market for the Common Stock,
then fair market value shall be determined in good
faith by the Board of Directors of the Company.
2. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the fair market value of the Warrant
Stock reasonably determined by the Board of Directors of the Company.
3. Certain Adjustments.
3.1 Changes in Common Stock. If the Company shall (i) combine
the outstanding shares of Common Stock into a lesser number of shares,
(ii) subdivide the outstanding shares of Common Stock into a greater
number of shares, or (iii) issue additional shares of Common Stock as a
dividend or other distribution with respect to the Common Stock, the
number of shares of Warrant Stock shall be equal to the number of
shares which the Holder would have been entitled to receive after the
happening of any of the events described above if such shares had been
issued immediately prior to the happening of such event, such
adjustment to become effective concurrently with the effectiveness of
such event. The Purchase Price in effect immediately prior to any such
combination of Common Stock shall, upon the effectiveness of such
combination, be proportionately increased. The Purchase Price in effect
immediately prior to any such subdivision of Common Stock or at the
record date of such dividend shall upon the effectiveness of such
subdivision or immediately after the record date of such dividend be
proportionately reduced.
3.2 Reorganizations and Reclassifications. If there shall
occur any capital reorganization or reclassification of the Common
Stock (other than a change in par value or a subdivision or combination
as provided for in Section 3.1), then, as part of any such
reorganization or reclassification, lawful provision shall be made so
that the Holder shall have the right thereafter to receive upon the
exercise hereof the kind and amount of shares of
-4-
stock or other securities or property which such Holder would have been
entitled to receive if, immediately prior to any such reorganization or
reclassification, such Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant. In
any such case, appropriate adjustment (as reasonably determined by the
Board of Directors of the Company) shall be made in the application of
the provisions set forth herein with respect to the rights and
interests thereafter of the Holder such that the provisions set forth
in this Section 3 (including provisions with respect to adjustment of
the Purchase Price) shall thereafter be applicable, as nearly as is
reasonably practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this
Warrant.
3.3 Merger, Consolidation or Sale of Assets. Subject to the
provisions of Section 8, if there shall be a merger or consolidation of
the Company with or into another corporation (other than a merger or
reorganization involving only a change in the state of incorporation of
the Company or the acquisition by the Company of other businesses where
the Company survives as a going concern), or the sale of all or
substantially all of the Company's capital stock or assets to any other
person, then as a part of such transaction, provision shall be made so
that the Holder shall thereafter be entitled to receive the number of
shares of stock or other securities or property of the Company, or of
the successor corporation resulting from the merger, consolidation or
sale, to which the Holder would have been entitled if the Holder had
exercised its rights pursuant to the Warrant immediately prior thereto.
In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3 to the end that the
provisions of this Section 3 shall be applicable after that event in as
nearly equivalent a manner as may be practicable.
3.4 Certificate of Adjustment. When any adjustment is required
to be made in the Purchase Price, the Company shall promptly mail to
the Holder a certificate setting forth the Purchase Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment. Delivery of such certificate shall be deemed to be a
final and binding determination with respect to such adjustment unless
challenged by the Holder within ten (10) days of receipt thereof. Such
certificate shall also set forth the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable
following the occurrence of any of the events specified in this Section
3.
-5-
4. Compliance with Securities Act.
4.1 Unregistered Securities. The Holder acknowledges that this
Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any successor legislation (the "SECURITIES ACT"), and
agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Stock in the absence
of (i) an effective registration statement under the Securities Act
covering this Warrant or such Warrant Stock and registration or
qualification of this Warrant or such Warrant Stock under any
applicable "blue sky" or state securities law then in effect, or (ii)
an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required. The Company may delay
issuance of the Warrant Stock until completion of any action or
obtaining of any consent, which the Company deems necessary under any
applicable law (including without limitation state securities or "blue
sky" laws).
4.2 Investment Letter. Without limiting the generality of
Section 4.1, unless the offer and sale of any shares of Warrant Stock
shall have been effectively registered under the Securities Act, the
Company shall be under no obligation to issue the Warrant Stock unless
and until the Holder shall have executed an investment letter in form
and substance satisfactory to the Company, including a warranty at the
time of such exercise that the Holder is acquiring such shares for its
own account, for investment and not with a view to, or for sale in
connection with, the distribution of any such shares.
4.3 Legend. Certificates delivered to the Holder pursuant to
Section 1.3 shall bear the following legend or a legend in
substantially similar form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN
FOR INVESTMENT AND THEY MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED BY ANY PERSON, INCLUDING A PLEDGEE, IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM
REGISTRATION IS THEN AVAILABLE."
5. Reservation of Stock. From and after the Filing Date, the Company
will at all times thereafter reserve and keep available, solely for issuance and
delivery upon the exercise of this Warrant, such shares of Warrant Stock and
other stock, securities and property, as from time to time shall be issuable
upon the exercise of this Warrant. The Company covenants that all shares of
Warrant Stock so issuable will, when issued, be duly and validly issued and
fully paid and nonassessable.
6. Call. Notwithstanding anything herein to the contrary, the Company,
at its option, may call up to one hundred percent (100%) of this Warrant by
providing the Holder of this Warrant written notice pursuant to Section 11 (the
"Call Notice") if at any time following the date hereof, the closing price or
last reported sale (the "Closing Price") of the Common Stock on the stock
exchange or quotation system on which the Common Stock is then traded or quoted
is
-6-
equal to or greater than $2.50 per share for a 60 consecutive calendar day
period, provided that during such 60 consecutive calendar day period, the
average daily trading volume for each day is equal to or greater than 75,000
shares (the "Market Condition"), and provided further that the call option
pursuant to this Section 6 shall be conditioned upon there being in effect, on
the date of satisfaction of the Market Condition or at any time thereafter, a
valid registration statement on Form S-1 or Form S-3 promulgated under the
Securities Act or any successor or equivalent forms thereto (the "Registration
Statement") covering the resale of the Warrant Stock (it being understood that
this Warrant will be subject to the call option pursuant to this Section 6 on
the date that the Registration Statement becomes effective if the Market
Condition has been previously satisfied, whether or not the Market Condition is
satisfied on such date, so long as the Closing Price on such date is equal to or
greater than $1.00). The rights and privileges granted pursuant to this Warrant
with respect to the shares of Warrant Stock subject to the Call Notice (the
"Called Warrant Shares") shall expire on the Early Termination Date if this
Warrant is not exercised with respect to such Called Warrant Shares prior to
such Early Termination Date. In the event this Warrant is not exercised with
respect to the Called Warrant Shares, the Company shall remit to the Holder of
this Warrant (i) $.001 per Called Warrant Share and (ii) a new Warrant
representing the number of shares of Warrant Stock, if any, which shall not have
been subject to the Call Notice upon the Holder tendering to the Company the
applicable Warrant certificate.
7. Replacement of Warrants. Upon 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) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
8. Termination Upon Certain Events. If there shall be a merger or
consolidation of the Company with or into another corporation (other than a
merger or reorganization involving only a change in the state of incorporation
of the Company or the acquisition by the Company of other businesses where the
Company survives as a going concern), or the sale of all or substantially all of
the Company's capital stock or assets to any other person, or the liquidation or
dissolution of the Company, then as a part of such transaction, at the Company's
option, either:
(a) provision shall be made so that the Holder shall
thereafter be entitled to receive the number of shares of stock or
other securities or property of the Company, or of the successor
corporation resulting from the merger, consolidation or sale, to which
the Holder would have been entitled if the Holder had exercised its
rights pursuant to the Warrant immediately prior thereto (and, in such
case, appropriate adjustment shall be made in the application of the
provisions of this Section 8(a) to the end that the provisions of this
Section 3 shall be applicable after that event in as nearly equivalent
a manner as may be practicable); or
(b) this Warrant shall terminate on the effective date of such
merger, consolidation or sale (the "TERMINATION DATE") and become null
and void, provided that if this Warrant shall not have otherwise
terminated or expired, (1) the Company shall have given the Holder
written notice of such Termination Date at least ten (10) business days
-7-
prior to the occurrence thereof and (2) the Holder shall have the right
until 5:00 p.m., Eastern Standard Time, on the day immediately prior to
the Termination Date to exercise its rights hereunder to the extent not
previously exercised.
9. Transferability. Without the prior written consent of the Company,
the Warrant shall not be assigned, pledged or hypothecated in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process. Any attempted transfer, assignment, pledge,
hypothecation or other disposition of the Warrant or of any rights granted
hereunder contrary to the provisions of this Section 9, or the levy of any
attachment or similar process upon the Warrant or such rights, shall be null and
void.
10. No Rights as Stockholder. Until the exercise of this Warrant, the
Holder shall not have or exercise any rights by virtue hereof as a stockholder
of the Company.
11. Notices. All notices, requests and other communications hereunder
shall be in writing, shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered mail, postage prepaid, return receipt requested. In the case
of notices from the Company to the Holder, they shall be sent to the address
furnished to the Company in writing by the last Holder who shall have furnished
an address to the Company in writing. All notices from the Holder to the Company
shall be delivered to the Company at its offices at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or such other address as the Company shall so notify
the Holder. All notices, requests and other communications hereunder shall be
deemed to have been given (i) by hand, at the time of the delivery thereof to
the receiving party at the address of such party described above, (ii) if made
by telex, telecopy or facsimile transmission, at the time that receipt thereof
has been acknowledged by electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the day such notices is
delivered to the courier service, or (iv) if sent by registered mail, on the
fifth business day following the day such mailing is made.
12. Waivers and Modifications. Any term or provision of this Warrant
may be waived only by written document executed by the party entitled to the
benefits of such terms or provisions. The terms and provisions of this Warrant
may be modified or amended only by written agreement executed by the parties
hereto.
13. Headings. The headings in this Warrant are for convenience of
reference only and shall in no way modify or affect the meaning or construction
of any of the terms or provisions of this Warrant.
-8-
14. Governing Law. This Warrant will be governed by and construed in
accordance with and governed by the laws of the State of Delaware, without
giving effect to the conflict of law principles thereof.
CONNECTIVCORP
By:
------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
-9-
EXHIBIT A
PURCHASE FORM
To: CONNECTIVCORP
The undersigned pursuant to the provisions set forth in the attached
Warrant (No. W-____), hereby irrevocably elects to (check one):
_____ (A) purchase ___ shares of the Common Stock, par
value $0.001 per share, of CONNECTIVCORP (the "COMMON
STOCK"), covered by such Warrant and herewith makes
payment of $_____, representing the full purchase
price for such shares at the price per share provided
for in such Warrant; or
_____ (B) convert ___ Converted Warrant Shares into that
number of shares of fully paid and nonassessable
shares of Common Stock, determined pursuant to the
provisions of Section 1.4 of the Warrant.
The Common Stock for which the Warrant may be exercised or converted shall be
known herein as the "Warrant Stock".
The undersigned is aware that the Warrant Stock has not been and will
not be registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT") or any state securities laws. The undersigned understands that reliance by
the Company on exemptions under the Securities Act is predicated in part upon
the truth and accuracy of the statements of the undersigned in this Purchase
Form.
The undersigned represents and warrants that (1) it has been furnished
with all information which it deems necessary to evaluate the merits and risks
of the purchase of the Warrant Stock, (2) it has had the opportunity to ask
questions concerning the Warrant Stock and the Company and all questions posed
have been answered to its satisfaction, (3) it has been given the opportunity to
obtain any additional information it deems necessary to verify the accuracy of
any information obtained concerning the Warrant Stock and the Company and (4) it
has such knowledge and experience in financial and business matters that it is
able to evaluate the merits and risks of purchasing the Warrant Stock and to
make an informed investment decision relating thereto.
The undersigned hereby represents and warrant that it is purchasing the
Warrant Stock for its own account for investment and not with a view to the sale
or distribution of all or any part of the Warrant Stock.
The undersigned understands that because the Warrant Stock has not been
registered under the Securities Act, it must continue to bear the economic risk
of the investment for an indefinite period of time and the Warrant Stock cannot
be sold unless it is subsequently
registered under applicable federal and state securities laws or an exemption
from such registration is available.
The undersigned agrees that it will in no event sell or distribute or
otherwise dispose of all or any part of the Warrant Stock unless (1) there is an
effective registration statement under the Securities Act and applicable state
securities laws covering any such transaction involving the Warrant Stock, or
(2) the Company receives an opinion satisfactory to the Company of the
undersigned's legal counsel stating that such transaction is exempt from
registration. The undersigned consents to the placing of a legend on its
certificate for the Warrant Stock stating that the Warrant Stock has not been
registered and setting forth the restriction on transfer contemplated hereby and
to the placing of a stop transfer order on the books of the Company and with any
transfer agents against the Warrant Stock until the Warrant Stock may be legally
resold or distributed without restriction.
The undersigned has considered the federal and state income tax
implications of the exercise of the Warrant and the purchase and subsequent sale
of the Warrant Stock.
Dated:
-------------------------
NYC281441v4
2