Exhibit 10.6
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
CHADMOORE WIRELESS GROUP, INC.
WARRANT TO PURCHASE 1,822,500 SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, GATX CAPITAL CORPORATION and its
assignees are entitled to subscribe for and purchase 1,822,500 shares of the
fully paid and nonassessable Common Stock (as adjusted pursuant to Section 4
hereof, the "Shares") of CHADMOORE WIRELESS GROUP, INC., a Colorado corporation
(the "Company"), at the price of $0.39 per share (such price and such other
price as shall result, from time to time, from the adjustments specified in
Section 4 hereof is herein referred to as the "Warrant Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth.
Notwithstanding the foregoing, if the initial holder of this Warrant, does not
increase the availability to the Company of loans pursuant to Section 2.01(b) of
the Senior Secured Loan Agreement, dated as of March 2, 1999 (the "Loan
Agreement") to $27,000,000 on or before 120 days from the Date of Grant, then on
such date the number of shares issuable upon exercise of this Warrant shall be
reduced to the number determined by multiplying number of shares by a fraction
the numerator of which is the maximum aggregate amount of all loans made
available to the Company under Sections 2.01(a) and 2.01(b) of the Loan
Agreement and the denominator of which is $27,000,000. As used herein, (a) the
term "Date of Grant" shall mean March 2, 1999 and (b) the term "Other Warrants"
shall mean any other warrants issued by the Company in connection with the
transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of this Warrant. The term "Warrant" as
used herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
until ten (10) years after the Date of Grant.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased; or (c) exercise of the "net issuance" right provided for in Section
10.2 hereof. The person or persons in whose name(s) any certificate(s)
representing the Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty (30) days after such exercise and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof as soon as possible and in any event within such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. In order to prevent
dilution of the rights granted under this Warrant, the Warrant Price shall be
subject to adjustment from time to time as provided in this Section 4, and the
number of Shares obtainable upon exercise of this Warrant shall be subject to
adjustment from time to time, as provided in this Section 4.
(a) Adjustment of Warrant Price and Number of Shares upon Issuance of
Common Stock. If and whenever, on or after the date hereof, either the Company
issues or sells, or has issued or sold, or in accordance with Section 4(b) is
deemed to have issued or sold, other than pursuant to a Permitted Issuance, any
shares of Common Stock, including upon exercise, exchange or conversion of any
Floating Price Securities for a consideration per share less than the Warrant
Price in effect immediately prior to such issuance or sale, then immediately
upon such issuance or sale the Warrant Price shall be reduced to equal the
amount determined by multiplying the Warrant Price in effect immediately prior
to such issuance or sale by a fraction, the numerator of which will be the sum
of (1) the number of shares of Common Stock Deemed Outstanding immediately prior
to such issuance or sale multiplied by the Warrant Price in effect immediately
prior to such issuance or sale, plus (2) the consideration, if any, received by
the Company upon such issuance or sale, and the denominator of which will be the
product derived by multiplying the Warrant Price in effect immediately prior to
such issuance or sale by the number of shares of Common Stock Deemed Outstanding
immediately after such issuance or sale. Upon each such adjustment of the
Warrant Price hereunder, the number of
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Shares acquirable upon exercise of this Warrant shall
be adjusted to equal the number of shares determined by multiplying the Warrant
Price in effect immediately prior to such adjustment by the number of Shares
acquirable (whether or not then acquirable or subject to a contingency) upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Warrant Price resulting from such adjustment. For
purposes of this Section 4, the calculation of the number of shares of Common
Stock Deemed Outstanding shall exclude the number of Shares issuable upon
exercise of the Warrants.
(b) Effect on Warrant Price of Certain Events. For
purposes of determining the adjusted Warrant Price under Section 4(a), the
following shall be applicable:
(i) Issuance of Rights or Options. If the Company in any manner grants
any rights or options to subscribe for or to purchase (including, without
limitation, the issuance of any notes or other debt instruments convertible into
or payable in) Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (including without limitation convertible common
stock) (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities" other than a Permitted Issuance, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the Warrant Price in effect
immediately prior to such issuance or sale, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of this paragraph, the "price per share for which Common
Stock is issuable upon exercise of such Options or upon conversion or exchange
of such Convertible Securities" is determined by dividing (A) the total amount,
if any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in the case
of such Options which are exercisable for Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Warrant Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon such conversion or exchange is less that the
Warrant Price in effect immediately prior to such issuance or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
this paragraph, the "price per share for which common Stock is issuable upon
such conversion or exchange" is determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such
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Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Warrant Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issuance or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Warrant Price has been or is to be
made pursuant to other provisions of this Section 4(b), no further adjustment of
the Warrant Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If either the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion or exchange or any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock shall change at any time (other than with respect to Options or
Convertible Securities constituting Floating Price Securities), the Warrant
Price in effect at the time of such change shall be adjusted to the Warrant
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold and the number of Shares shall be
correspondingly readjusted; provided that no readjustment shall be made pursuant
to this Section 4(b)(iii) in respect of any Shares which have been issued on or
prior to the occurrence of any action otherwise requiring such readjustment.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
Upon the expiration of any Option or the termination of any right to convert or
exchange any Convertible Securities, in either case without the exercise of such
Option or right, the Warrant Price then in effect and the number of Shares
acquirable hereunder (whether or not then acquirable or subject to a
contingency) shall be adjusted to the Warrant Price and number of Shares which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent not exercised in full and
outstanding immediately prior to such expiration or termination, never been
issued; provided, that no readjustment shall be made under this Section 4(b)(iv)
in respect of any Shares which have been issued on or prior to such expiration
or termination.
(v) Calculation of Consideration Received. If any Common Stock, Options
or Convertible Securities are issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor shall be deemed to be the net
amount received by the Company therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of marketable securities, in which case the amount of consideration received by
the Company shall be the market price thereof as of the date of receipt. In case
any Common Stock, Options or Convertible Securities are issued to the owners of
the non-surviving entity in connection with any merger or other business
combination in which the Company is the surviving entity, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or marketable securities shall
be determined jointly by the Company and the holder of this Warrant. If such
parties are unable to reach agreement within a
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reasonable period of time, such fair value shall be determined by an independent
investment banking or appraisal firm jointly selected by the Company and the
holder of this Warrant, whose determination shall be final and binding on the
Company and the holder of this Warrant. If the holder of this Warrant and the
Company are unable to agree upon an independent investment banking or appraisal
firm, then the holder of this Warrant shall select one such independent
investment banking or appraisal firm and the Company shall select another such
firm, and the calculation of fair value shall be made by a third independent
investment banking or appraisal firm that has been selected by the two firms so
chosen by the holder of this Warrant and the Company. In each such case, the
firm calculating fair value shall submit to the Company and to each holder of
this Warrant such firm's written opinion addressed to the holder of this Warrant
setting forth such determination of fair value. If the independent investment
banking or appraisal firm gives a range for its calculation of fair value, then
fair value for purposes of this paragraph shall be the midpoint of such range.
The fees and expenses of such firm shall be paid by the Company.
(vi) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Option shall be deemed to have been
issued for no consideration.
(vii) Treasury Shares. The number of shares of Common Stock outstanding
at any given time does not include shares owned or held by or for the account of
the Company or any direct or indirect subsidiary of the Company and the
disposition of any shares so owned or held shall be considered an issue or sale
of Common Stock.
(viii) Record Date. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(c) Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, then the Warrant Price and Deemed Issue Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Shares obtainable upon exercise of this Warrant (whether or not then
acquirable or subject to a contingency), as the case may be, shall be
proportionately increased. If the Company at any time combines (by reverse stock
split or otherwise) the Common Stock into a smaller number of shares, then the
Warrant Price and Deemed Issue Price in effect immediately prior to such
combination shall be proportionately increased and the number of Shares
obtainable upon exercise of this Warrant (whether or not then acquirable or
subject to a contingency), as the case may be, shall be proportionately
decreased.
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(d) Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change". Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holder of this
Warrant) to ensure that such holder shall thereafter have the right to acquire
and receive upon exercise hereof, in lieu of or addition to (as the case may be)
the Shares immediately theretofore acquirable and receivable upon exercise of
this Warrant (whether or not then acquirable or subject to a contingency), such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for the number of Shares immediately theretofore acquirable
and receivable (whether or not then acquirable or subject to a contingency) upon
exercise of such holder's Warrant had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the holder of this Warrant) with respect to such
holder's rights and interests to insure that the provisions hereof shall
thereafter be applicable to this Warrant (including, without limitation, in the
case of any such Organic Change in which the successor entity or purchasing
entity is other than the Company, an immediate adjustment of the Warrant Price
to the product of the Warrant Price immediately prior to such Organic Change
multiplied by the ratio of such value of the Common Stock reflected by the terms
of such Organic Change divided by the Fair Market Value of the Common Stock in
effect immediately prior to such Organic Change and a corresponding immediate
adjustment to the number of Shares acquirable and receivable upon exercise of
the Warrant (whether or not then acquirable or subject to a contingency), if the
value so reflected is less than the Fair Market Value of the Common Stock in
effect immediately prior to such Organic Change). The Company shall not affect
any such Organic Change unless, prior to the consummation thereof, the successor
entity (if other than the Company) resulting from such Organic Change (including
a purchaser of all or substantially all the Company's assets) assumes by written
instrument (in form and substance satisfactory to the holder of this Warrant)
the obligation to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire upon exercise of Warrants.
(e) Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Warrant Price, the Deemed Issue Price and the
number of Shares obtainable upon exercise of this Warrant (whether or not then
acquirable or subject to a contingency) so as to protect the rights of the
holder of this Warrant; provided that no such adjustment shall increase the
Warrant Price or decrease the number of Shares issuable upon exercise hereof
other than as a readjustment in a manner consistent with that contemplated by
Section 2(b)(iv).
(f) Notices.
(i) The Company shall give written notice to the holder of this Warrant
at least 30 days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders
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of Common Stock, or (C) for determining rights to vote with respect to any
Organic Change, dissolution or liquidation.
(ii) The Company shall also give written notice to the holder of this Warrant at
least 30 days prior to the date on which any Organic Change, dissolution or
liquidation shall take place.
(g) Definitions. The following terms shall have the following respective
meanings when used in this Section 4:
"Common Stock Deemed Outstanding" means, at any given time, the number of
shares of all classes of the Company's Common Stock actually outstanding at such
time, plus the number of shares of the Company's Common Stock deemed to be
outstanding pursuant to Sections 4(b)(i) and 4(b)(ii) hereof.
"Floating Price Securities" means the securities listed in Section 2 of
Exhibit C hereto and any other securities pursuant to which the Company is
either obligated or permitted to issue shares of Common Stock at a conversion or
exercise price which is determined from time to time with reference to the
market price for shares of the Company's Common Stock.
"Identified Securities" means the securities listed on Exhibit C hereto.
"Investment Agreement" means the Investment Agreement, dated as of May 1,
1999, between the Company and Recovery Equity Investors II, L.P.
"Permitted Issuance" means (i) the issuance from time to time by the
Company of shares of Common Stock upon exercise of the REI Warrants, and (ii)
the issuance from time to time by the Company of Identified Securities or of
shares of Common Stock upon the exercise of Identified Securities other than
Floating Price Securities.
"REI Warrants" means the Stock Purchase Warrants, each dated as of May 1,
1998, issued to Recovery Equity Investors II, L.P. (as each such Warrant may be
amended, supplemented or otherwise modified from time to time in accordance with
the provisions thereof).
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant at such holder's last known address.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as reasonably determined in good faith
by the Company's Board of Directors.
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7. Compliance with Act; Disposition of Warrant or Shares of Common Stock.
(a) Compliance with Act. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant, and the Shares to be issued upon exercise
hereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares except under
circumstances which will not result in a violation of the Act or any applicable
state securities laws. Upon exercise of this Warrant, unless the Shares being
acquired are registered under the Act and any applicable state securities laws
or an exemption from such registration is available, the holder hereof shall
confirm in writing that the Shares so purchased are being acquired for
investment and not with a view toward distribution or resale in violation of the
Act and shall confirm such other matters related thereto as may be reasonably
requested by the Company. This Warrant and all Shares issued upon exercise of
this Warrant (unless registered under the Act and any applicable state
securities laws) shall be stamped or imprinted with a legend in substantially
the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR
(iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER
WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated to the reasonable satisfaction of counsel to the
Company. In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
(1)The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.
(2)The holder understands that this Warrant has not been registered under
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the holder's investment intent
as expressed herein.
(3)The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The holder is aware of the provisions of
Rule 144, promulgated under the Act.
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(4)The holder is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale or
other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, the
holder hereof agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, or other evidence, if reasonably satisfactory to the Company,
to the effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state securities law then in effect) of this Warrant or the Shares and
indicating whether or not under the Act certificates for this Warrant or the
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Upon receiving such written notice and reasonably satisfactory opinion
or other evidence, the Company, as promptly as practicable but no later than
fifteen (15) days after receipt of the written notice, shall notify such holder
that such holder may sell or otherwise dispose of this Warrant or such Shares,
all in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 7(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly with details thereof
after such determination has been made. Notwithstanding the foregoing, this
Warrant or such Shares may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 or 144A under the Act,
provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 or 144A have been satisfied. Each certificate
representing this Warrant or the Shares thus transferred (except a transfer
pursuant to Rule 144 or 144A) shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with such laws,
unless in the aforesaid opinion of counsel for the holder, such legend is not
required in order to ensure compliance with such laws. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer or grant of a security interest in, this Warrant (or the Common
Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of
the holder if the holder is a partnership or to a member of the holder if the
holder is a limited liability company, (ii) to a partnership of which the holder
is a partner or to a limited liability company of which the holder is a member,
or (iii) to any affiliate of the holder if the holder is a corporation;
provided, however, in any such transfer, if applicable, the transferee shall on
the Company's request agree in writing to be bound by the terms of this Warrant
as if an original holder hereof.
8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Shares, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares
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purchasable upon the exercise hereof shall have become deliverable, as provided
herein. Notwithstanding the foregoing, the Company will transmit to the holder
of this Warrant such information, documents and reports as are generally
distributed to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the shareholders.
9. Registration Rights. Concurrently with the issuance of this Warrant,
the initial holder of this Warrant has been made a party to that certain
Registration Rights Agreement, dated as of May 1, 1998, between the Company and
Recovery Equity Investors II, L.P., (the "Registration Rights Agreement").
10. Additional Rights.
10.1 [Intentionally omitted.]
10.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. 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 10.2 at any time or from time to time during the term of
this Warrant. 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 exercise price or any cash or
other consideration) that number of shares of fully paid and
nonassessable Common Stock as is determined according to the
following formula:
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X = B - A
-----
Y
Where: X = the number of shares of Common Stock that shall be
issued to holder
Y = the fair market value of one share of Common Stock
A = the aggregate Warrant Price of the specified number of
Converted Warrant Shares immediately prior to the
exercise of the Conversion Right (i.e., the number of
Converted Warrant Shares multiplied by the Warrant
Price)
B = the aggregate fair market value of the specified number
of Converted Warrant Shares (i.e. the number of
Converted Warrant Shares multiplied by the fair market
value of one Converted Warrant Share)
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 on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(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 a written statement (which may be in the form of Exhibit A-1 or
Exhibit A-2 hereto) specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in Section 10.2(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 closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). 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
10.2, "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 Securities and Exchange Commission, then the initial "Price to
Public" specified in the final prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with and
contingent upon a Public Offering, then as follows:
(A) 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 30-day period ending five business days
prior to the Determination Date;
(B) If traded on the Nasdaq Stock Market or other over-the-counter
system, 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 30-day period
ending five business days prior to the Determination Date; and
(C) If there is no public market for the Common Stock, then fair market
value shall be determined by mutual agreement of the holder of this Warrant and
the Company.
10.3 Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Common Stock is greater than the Warrant Price
then in effect, this Warrant shall be deemed automatically exercised pursuant to
Section 10.2 above (even if not surrendered) immediately before its expiration.
For purposes of such automatic exercise, the fair market value of one share of
the Common Stock upon such expiration shall be determined pursuant to Section
10.2(c). To the extent this Warrant or any portion thereof is deemed
automatically exercised pursuant to this Section 10.3, the Company agrees to
promptly notify the holder hereof of the number of Shares, if any, the holder
hereof is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company and
is a valid and binding obligation of the Company enforceable in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been duly authorized and reserved for issuance by the
Company and, when issued in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable;
(c) The execution and
delivery of this Warrant are not, and the issuance of the Shares upon exercise
of this Warrant in accordance with the terms hereof will not be, inconsistent
with the
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Company's articles of incorporation, as amended (the "Charter") or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby;
(d) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant; and
(e) The Charter of the Company is attached as Exhibit B hereto and the
capitalization of the Company is set forth on Exhibit C hereto.
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon the exercise or conversion of
this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
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17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
21. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
[ The remainder of this page is intentionally left blank.]
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The Company has caused this Warrant to be duly executed and delivered as
of the Date of Grant specified above.
CHADMOORE WIRELESS GROUP, INC.
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Title: President
-----------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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EXHIBIT A-1
NOTICE OF EXERCISE
To: CHADMOORE WIRELESS GROUP, INC.
1.The undersigned hereby:
*elects to purchase shares of Common Stock of CHADMOORE WIRELESS
GROUP, INC. pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full, or
*elects to exercise its net issuance rights pursuant to Section 10.2 of
the attached Warrant with respect to shares of Common Stock.
2. Please issue a certificate or certificates representing shares in
the name of the undersigned or in such other name or names as are specified
below:
(Name) (Address)
-------------- -------------------------
3.The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.
(Signature)
-------------------------
(Date)
-6-
EXHIBIT A-2
NOTICE OF EXERCISE
To: CHADMOORE WIRELESS GROUP, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S, filed, 19, the undersigned hereby:
*elects to purchase shares of Common Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant, or
*elects to exercise its net issuance rights pursuant to Section 10.2 of
the attached Warrant with respect to Shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $ or, if less, the net proceeds due the
undersigned from the sale of shares in the aforesaid public offering. If such
net proceeds are less than the purchase price for such shares, the undersigned
agrees to deliver the difference to the Company prior to theClosing.
(Signature)
(Date)
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EXHIBIT B
CHARTER
of
CHADMOORE WIRELESS GROUP, INC.
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EXHIBIT C
CAPITALIZATION
of
CHADMOORE WIRELESS GROUP, INC.
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