VERAZ NETWORKS, INC. WARRANT TO PURCHASE SERIES C PREFERRED STOCK
Exhibit 10.1
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
WARRANT TO PURCHASE SERIES C PREFERRED STOCK
No. PCW-1
|
December 31, 2002 |
Void After December 31, 2007
This Certifies That, for value received, Comdisco Ventures, Inc., a Delaware
corporation (the “Holder”), is entitled to subscribe for and purchase at the Exercise Price
(defined below) from Veraz Networks, Inc., a Delaware corporation, with its principal
office at ▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the “Company”) up to One Hundred Sixty Two Thousand
Five Hundred (162,500) shares of the Series C Preferred Stock of the Company, (the “Preferred
Stock”).
Immediately prior to the closing of the Company’s initial public offering, this warrant shall
become exercisable for that number of shares of Common Stock of the Company into which the shares
of Preferred Stock issuable under this warrant would then be convertible, so long as such shares,
if this warrant has been exercised prior to such offering, would have been converted into shares of
the Company’s Common Stock pursuant to the automatic conversion provisions (or otherwise) of the
Company’s Certificate of Incorporation.
1. Definitions. As used herein, the following terms shall have the following
respective meanings:
(a) “Exercise Period” shall mean the period commencing with the date hereof and ending five
(5) years later, unless sooner terminated as provided below.
(b) “Exercise Price” shall mean $0.1716 per share, subject to adjustment pursuant to Section 5
below.
(c) “Exercise Shares” shall mean the shares of the Preferred Stock issuable upon exercise of
this Warrant, subject to adjustment pursuant to the terms herein, including but not limited to
adjustment pursuant to Section 5 below.
2. Exercise of Warrant. The rights represented by this Warrant may be exercised in
whole or in part at any time during the Exercise Period, by delivery of the following to the
Company at its address set forth above (or at such other address as it may designate by notice in
writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
1.
(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of
indebtedness; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a certificate or certificates for
the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with
the Holder, if the Holder so designates, shall be issued and delivered to the Holder within a
reasonable time after the rights represented by this Warrant shall have been so exercised.
The person in whose name any certificate or certificates for Exercise Shares are to be issued
upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on
the date on which this Warrant was surrendered and payment of the Exercise Price was made,
irrespective of the date of delivery of such certificate or certificates, except that, if the date
of such surrender and payment is a date when the stock transfer books of the Company are closed,
such person shall be deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open.
2.1 Net Exercise. Notwithstanding any provisions herein to the contrary, if the fair market
value of one share of the Company’s Preferred Stock is greater than the Exercise Price (at the date
of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the
Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise in which event the Company shall issue to
the Holder a number of shares of Preferred Stock computed using the following formula:
X =
|
Y (A-B) | |||
| A |
Where X =
|
the number of shares of Preferred Stock to be issued to the Holder | |
Y =
|
the number of shares of Preferred Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation) | |
A =
|
the fair market value of one share of the Preferred Stock (at the date of such calculation) | |
B =
|
Exercise Price (as adjusted to the date of such calculation) |
For purposes of the above calculation, the fair market value of one share of Preferred Stock
shall be determined by the Company’s Board of Directors in good faith; provided, however, that in
the event that this Warrant is exercised pursuant to this Section 2.1 in connection with the
Company’s initial public offering of its Common Stock, the fair market value per share shall be the
product of (i) the per share offering price to the public of the Company’s initial public offering,
and (ii) the number of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise.
2.
3. Covenants of the Company.
3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise
Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issuance thereof. The Company further covenants and agrees
that the Company will at all times during the Exercise Period, have authorized and reserved, free
from preemptive rights, a sufficient number of shares of its capital stock to provide for the
exercise of the rights represented by this Warrant. If at any time during the Exercise Period the
number of authorized but unissued shares of capital stock shall not be sufficient to permit
exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of capital stock to such
number of shares as shall be sufficient for such purposes.
3.2 No Impairment. Except and to the extent as waived or consented to by the Holder, the
Company will not, by amendment of its Certificate of Incorporation or through any 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 hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such action as may be
necessary or appropriate in order to protect the exercise rights of the Holder against impairment.
3.3 Notices of Record Date. In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the Company shall mail to the Holder, at least
ten (10) days prior to the date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
4. Representations of Holder.
4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it
is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with
a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The
Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise
Shares the Holder is acquiring is being acquired for, and will be held for, its account only.
4.2 Securities Are Not Registered.
(a) The Holder understands that the Warrant and the Exercise Shares have not been registered
under the Securities Act of 1933, as amended (the “Act”) on the basis that no distribution or
public offering of the stock of the Company is to be effected. The Holder realizes that the basis
for the exemption may not be present if, notwithstanding its representations, the Holder has a
present intention of acquiring the securities for a fixed or determinable period in the future,
selling (in connection with a distribution or otherwise),
3.
granting any participation in, or otherwise distributing the securities. The Holder has no
such present intention.
(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such registration is
available. The Holder recognizes that the Company has no obligation to register the Warrant or the
Exercise Shares of the Company, or to comply with any exemption from such registration.
(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant
to Rule 144 adopted under the Act unless certain conditions are met, including, among other things,
the existence of a public market for the shares, the availability of certain current public
information about the Company, the resale following the required holding period under Rule 144 and
the number of shares being sold during any three month period not exceeding specified limitations.
Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company presently has no plans to satisfy these conditions in the foreseeable future.
4.3 Disposition of Warrant and Exercise Shares.
(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or
Exercise Shares in any event unless and until:
(i) The Company shall have received a letter secured by the Holder from the Securities and
Exchange Commission stating that no action will be recommended to the Commission with respect to
the proposed disposition;
(ii) There is then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with said registration statement; or
(iii) The Holder shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by the Company, the Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the
effect that such disposition will not require registration of such Warrant or Exercise Shares under
the Act or any applicable state securities laws.
(b) Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to
a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in
accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary,
a parent corporation that owns all of the capital stock of the Holder or a corporation affiliated
with the Holder by common control with or by such Holder, provided that such affiliated corporation
is not reasonably deemed to be a competitor of the Company, or (C) a limited liability company
transferring to its members or former members in accordance with their interest in the limited
liability company; provided that in each case the
4.
transferee will agree in writing to be subject to the terms of this Warrant to the same extent
as if it were an original Holder hereunder.
(c) The Holder understands and agrees that all certificates evidencing the shares to be issued
to the Holder may bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
5. Adjustment of Exercise Price and Effect of Organic Changes.
(a) Adjustment of Exercise Price and Exercise Shares. In the event of changes in the
outstanding Preferred Stock of the Company by reason of stock dividends, splits, recapitalizations,
reclassifications, conversion to Common Stock pursuant to the Company’s Certificate of
Incorporation, combinations or exchanges of shares, separations, reorganizations, liquidations, or
the like, the number and class of shares available under the Warrant in the aggregate and the
Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for
the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would
have owned had the Warrant been exercised prior to the event and had the Holder continued to hold
such shares until after the event requiring adjustment. The form of this Warrant need not be
changed because of any adjustment in the number or class of Exercise Shares subject to this
Warrant.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale. If any recapitalization,
reclassification or reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with another corporation, or the sale of all or substantially all of its
assets or other transaction shall be effected in such a way that holders of the Company’s Preferred
Stock shall be entitled to receive stock, securities, or other assets or property (an “Organic
Change”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made
by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive
(in lieu of the shares of the Preferred Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby) such shares of stock, securities
or other assets or property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Preferred Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the rights represented
hereby. In the event of any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be
applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon
the exercise hereof. The Company will not effect any such consolidation, merger or sale unless,
prior to the
5.
consummation thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by written instrument
this Warrant, executed and mailed or delivered to the registered Holder hereof at the last address
of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such
shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder
may be entitled to purchase.
(c) Certain Events. If any change in the outstanding Preferred Stock of the Company or any
other event occurs as to which the other provisions of this Section 5 are not strictly applicable
or if strictly applicable would not fairly protect the purchase rights of the Holder of the Warrant
in accordance with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the Exercise Price or the
application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as to give the Holder of the Warrant upon exercise for the same aggregate Exercise
Price the total number, class and kind of shares as he would have owned had the Warrant been
exercised prior to the event and had he continued to hold such shares until after the event
requiring adjustment.
6. Fractional Shares. No fractional shares shall be issued upon the exercise of this
Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining
whether the exercise would result in the issuance of any fractional share. If, after aggregation,
the exercise would result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash
equal to the product resulting from multiplying the then current fair market value of an Exercise
Share by such fraction.
7. Early Termination. In the event of, at any time during the Exercise Period, an
initial public offering of securities of the Company registered under the Act, the Company shall
provide to the Holder fifteen (15) days advance written notice of such public offering and this
Warrant shall terminate unless exercised immediately prior to the closing of such public offering.
8. Market Stand-Off Agreement. Holder shall not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale, any Common Stock (or other securities) of the
Company held by Holder, for a period of time specified by the managing underwriter(s) (not to
exceed one hundred eighty (180) days) following the effective date of a registration statement of
the Company filed under the Act. Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company and/or the managing underwriter(s) which are consistent with
the foregoing or which are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common
Stock (or other securities) until the end of such period. The underwriters of the Company’s stock
are intended third party beneficiaries of this Section 8 and shall have the right, power and
authority to enforce the provisions hereof as though they were a party hereto.
9. No Stockholder Rights. This Warrant in and of itself shall not entitle the Holder
to any voting rights or other rights as a stockholder of the Company.
6.
10. Transfer of Warrant. Subject to applicable laws and the restriction on transfer
set forth on the first page of this Warrant and in Section 4 of this Warrant, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon
delivery of this Warrant and the form of assignment attached hereto to any transferee designated by
Holder. The transferee shall sign an investment letter in form and substance satisfactory to the
Company.
11. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen,
mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may
reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof),
issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or
destroyed. Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
12. Notices, etc. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b)
when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address listed on the signature
page and to Holder at the address listed on the first paragraph of this Warrant or at such other
address as the Company or Holder may designate by ten (10) days advance written notice to the other
parties hereto.
13. Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of
and agreement to all of the terms and conditions contained herein.
14. Governing Law. This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of California.
7.
In Witness Whereof, the Company has caused this Warrant to be executed by its duly
authorized officer as of December 31, 2002.
| Veraz Networks, Inc. | ||||||
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇ | |||||
| Name: | ▇▇▇▇ ▇▇▇▇▇▇ | |||||
| Title: | ||||||
| Address: | ▇▇▇ ▇▇▇▇ ▇▇▇. | |||||
| ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ | ||||||
8.
NOTICE OF EXERCISE
(1) ¨ The undersigned hereby elects to purchase shares of the Series C
Preferred Stock of Veraz Networks, Inc. (the “Company”) pursuant to the terms of the attached
Warrant, and tenders herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.
¨ The undersigned hereby elects to purchase shares of the Series C Preferred
Stock of Veraz Networks, Inc. (the “Company”) pursuant to the terms of the net exercise provisions
set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable
transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of Series C Preferred
Stock in the name of the undersigned or in such other name as is specified below:
(Name)
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Series C Preferred Stock 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; (ii) the undersigned is aware of the Company’s
business affairs and financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the
undersigned is experienced in making investments of this type and has such knowledge and background
in financial and business matters that the undersigned is capable of evaluating the merits and
risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned
understands that the shares of Series C Preferred Stock issuable upon exercise of this Warrant have
not been registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason
of a specific exemption from the registration provisions of the Securities Act, which exemption
depends upon, among other things, the bona fide nature of the investment intent as expressed
herein, and, because such securities have not been registered under the Securities Act, they must
be held indefinitely unless subsequently registered under the Securities Act or an exemption from
such registration is available; (v) the undersigned is aware that the aforesaid shares of Series C
Preferred Stock may not be sold pursuant to Rule 144 adopted under the Securities Act unless
certain conditions are met and until the undersigned has held the shares for the number of years
prescribed by Rule 144, that among the conditions for use of the Rule is the availability of
current information to the public about the Company and the Company has not made such information
available and has no present plans to do so; and (vi) the undersigned agrees not to make any
disposition of all or any part of the aforesaid shares of Series C Preferred Stock unless and until
there is then in effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance
with said registration statement, or the undersigned has provided the Company with an opinion
of counsel satisfactory to the Company, stating that such registration is not required.
| (Signature) | ||||
(Date)
|
(Print name) |
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form
and supply required information. Do not use this
form to purchase shares.)
For Value Received, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
Name: |
||
| (Please Print) | ||
Address: |
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| (Please Print) |
Dated: , 20
Holder’s
Signature:
Signature:
Holder’s
Address:
Address:
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.