THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) UNLESS PURSUANT TO AN EXEMPTION
THEREFROM UNDER RULE 144 (OR ANY SUCCESSOR PROVISION) OF THE ACT.
Warrant No. ___ Dated: August 13, 1999
CFI PROSERVICES, INC
FORM OF
WARRANT TO PURCHASE _______ SHARES
OF COMMON STOCK
CFI PROSERVICES, INC., an Oregon corporation (the "Company"),
hereby certifies that, for value received, ________________________________
(the "Initial Holder"), or its registered transferees, successors or assigns
(collectively, together with the Initial Holder, the "holder"), is the
registered holder of warrants (the "Warrants") to subscribe for and purchase
_______ shares of the fully paid and nonassessable Common Stock (as adjusted
pursuant to Section 4 hereof, the "Warrant Shares") of the Company, at a
purchase price per share equal to $12.34375 (such price, as adjusted pursuant to
Section 4 hereof, the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, (a) the term "Common
Stock" shall mean the Company's presently authorized Common Stock, no par value,
and any stock into or for which such Common Stock may hereafter be converted or
exchanged, and (b) the term "Date of Grant" shall mean the date of this Warrant.
The term "Warrant" as used herein shall be deemed to include any warrant issued
upon transfer or partial exercise of this Warrant, unless the context clearly
requires otherwise.
This Warrant is being issued pursuant to that certain
Financing Agreement (the "Financing Agreement") of even date herewith by and
among the Company, UltraData Corporation, Meca Software, L.L.C., Moneyscape
Holdings, Inc., the Lenders (as such term is defined therein), Foothill Capital
Corporation, as administrative agent for the Lenders, and Ableco Finance LLC, as
collateral agent for the Lender Group. Capitalized terms not otherwise defined
herein have the meanings set forth in the Financing Agreement. This Warrant,
together with other Warrants issued under the Financing Agreement as of the date
hereof, are referred to herein as the "Investor Warrants." The holder is
entitled to the rights and benefits under the Registration Rights Agreement (the
"Registration Rights Agreement") of even date herewith by and among the Company
and the holders of the Investor Warrants.
1. Term. This Warrant is exercisable, in whole or in part, at any time and
from time to time from the Date of Grant through and including the close of
business on the fifth anniversary of this Warrant (the "Expiration Date");
provided, however, that in the event that any portion of this Warrant is
unexercised as of the Expiration Date, the terms of Section 2(b) below shall
apply.
2. Exercise.
a. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, this Warrant may be exercised by the holder hereof, in whole or in
part and from time to time, by the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company, and, except as otherwise provided for herein, by the
payment to the Company of an amount equal to the then applicable Warrant Price
multiplied by the number of Warrant Shares then being purchased. The person or
persons in whose name(s) any certificate(s) representing shares of Common Stock
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 if exercised prior to the close of
business on such date; otherwise, the date of record shall be the next business
day. In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered by
the Company at its expense to the holder hereof as soon as possible and in any
event within ten (10) days after such exercise and, unless this Warrant has been
fully exercised (including without limitation, exercise pursuant to Section 2(b)
below), a new Warrant representing the portion of the Warrant 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
ten (10)-day period.
b. Automatic Exercise. In the event that any portion of this Warrant
remains unexercised as of the Expiration Date and the fair market value
(determined in accordance with Section 4.i. below) of one (1) share of Common
Stock as of the Expiration Date is greater than the applicable Warrant Price as
of the Expiration Date, then this Warrant shall be deemed to have been exercised
automatically immediately prior to the close of business on the Expiration Date
(or, in the event that the Expiration Date is not a business day, the
immediately preceding business day) (the "Automatic Exercise Date"), and the
person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of record of such
Warrant Shares as of the close of business on such Automatic Exercise Date. This
Warrant shall be deemed to be surrendered to the Company on the Automatic
Exercise Date by virtue of this Section 2.b. and without any action by the
holder of this Warrant or any other person, and payment to the Company of the
then applicable Warrant Price multiplied by the number of Warrant Shares then
being purchased shall be deemed to be made as of the Automatic Exercise Date
pursuant to the conversion provisions of Section 2(c) below (without payment by
the holder of any cash exercise price). As promptly as practicable on or after
the Automatic Exercise Date and in any event within ten (10) days thereafter,
the Company at its expense shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
Warrant Shares issuable upon such exercise.
2
c. Cashless Right to Convert Warrant into Common Stock; Net Issuance.
(1) Right to Convert. In addition to and without limiting the rights of the
holder hereof 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 2.c. at any time or from time
to time during the term of this Warrant, including upon the Automatic Exercise
Date. Upon exercise of the Conversion Right with respect to all or a specified
portion of Warrant Shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the holder (without payment by the holder
of any cash or other cash consideration) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing (i) the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in Section 2(c)(2) hereof), which value shall be equal to (A) the
aggregate fair market value of the Converted Warrant Shares issuable upon
exercise of this Warrant (or the specified portion hereof) on the Conversion
Date less (B) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right by (ii) the fair
market value of one (1) share of Common Stock on the Conversion Date.
Expressed as a formula, such conversion shall be computed as
follows:
X = A - B
-----
Y
Where: X = the number of shares of Common Stock to be issued
to the holder
Y = the fair market value ("FMV") of one (1) share of
Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant
Shares x Warrant Price)
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. For purposes of the Registration Rights
Agreement, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(2) 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 specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
which are being
3
surrendered (referred to in Section 2(c)(1) 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"). 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 ten (10) days following the Conversion
Date.
(3) Determination of Fair Market Value. For purposes of this Section 2.c.,
"fair market value" of a share of Common Stock shall have the meaning set forth
in Section 4.i. below.
3. Stock Fully Paid; Reservation of Shares. All Warrant 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, charges, and pre-emptive rights
with respect to the issue thereof. The Company shall pay all transfer taxes, if
any, attributable to the issuance of the Warrant Shares upon the exercise of
this Warrant. 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 this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events as set forth below:
a. Adjustment for Initial Errors and the Happening of Certain Events.
(1) The Company hereby acknowledges that the initial number of Warrant
Shares purchasable upon the exercise of this Warrant (the "Exercise Quantity")
was calculated based upon the Company's representation that the number of
outstanding shares of Common Stock of the Company as of the Date of Grant,
calculated on a fully diluted basis using the treasury stock method as
contemplated by the Accounting Principles Board Opinion No. 15 (as referred to
in the Statement of Financial Accounting Standards No. 128) (such shares as
calculated on any date, being referred to as "Fully Diluted Shares"), and before
giving effect to the issuance of any of the Warrants or Warrant Shares, totaled
7,636,440 shares. If for any reason it shall hereafter be determined that the
number of Fully Diluted Shares as of the Date of Grant differed from such
initial number of Warrant Shares, then the Company or the holder (whichever
shall discover such error) shall notify the other of such determination in
writing and the Company shall forthwith (but in no event more than five (5) days
thereafter) reissue all of the outstanding Warrants with an appropriate
proportional adjustment in said number of Warrant Shares to be effective as of
and from the Date of Grant, provided that such adjustment shall be made only if
it results in an increase in the number of Warrant Shares hereunder.
(2) If, prior to the first anniversary of the Date of Grant, holder has
been paid in full all Obligations owed to it and has received its pro rata
portion of a reduction fee of One Million dollars ($1,000,000) and the "success
fee" payable to it (as contemplated in
4
the applicable Lender Group Side Letter), then the initial Exercise Quantity of
this Warrant shall be decreased to 114,547 Warrant Shares or 60% of the initial
Exercise Quantity (the "First-Year Clawback Quantity"). If, prior to holder's
receipt of all such payments, holder has exercised this Warrant for more than
the First-Year Clawback Quantity, then holder shall return to the Company (and
if such a number of Warrant Shares equal to the excess over the First-Year
Clawback Quantity against delivery to holder by the Company of the aggregate
exercise price for such excess Warrant Shares (it being understood that if
holder has sold or otherwise disposed of such excess Warrant Shares, holder
shall still be required to return to the Company such excess Warrant Shares)
and, if the holder fails to return such excess Warrant Shares to the Company
within forty-five (45) days of the date the holder has been paid in full all
Obligations, the Company shall have a right of offset.
(3) If, after the first anniversary of the Date of Grant and prior to the
second anniversary of the Date of Grant, the holder has been paid in full all
Obligations under the Financing owed to it and has received its pro rata portion
of a reduction fee of Three Million dollars ($3,000,000) and the "success fee"
payable to it (as contemplated in the applicable Lender Group Side Letter), then
the initial Exercise Quantity of this Warrant shall be decreased to 57,273
Warrant Shares or 30% of the initial Exercise Quantity (the "Second-Year
Clawback Quantity"). If, prior to holder's receipt of all such payments, holder
has exercised this Warrant for more than the Second-Year Clawback Quantity, then
holder shall return to the Company a number of Warrant Shares equal to the
excess over the Second-Year Clawback Quantity against delivery to holder by the
Company of the aggregate exercise price for such excess Warrant Shares (it being
understood that if holder has sold or otherwise disposed of such excess Warrant
Shares, holder shall still be required to return to the Company such excess
Warrant Shares) and, if the holder fails to return such excess Warrant Shares to
the Company within forty-five (45) days of the date the holder has been paid in
full all Obligations, the Company shall have a right of offset.
(4) Any adjustments to the Warrant Price and the number of Warrant Shares
issuable upon exercise of this Warrant pursuant to the other subsections of this
Section 4 prior to the date of any increase or decrease in the Exercise Quantity
pursuant to Sections 4.a.(1), (2) or (3) shall be recalculated as if such
increased or decreased Exercise Quantity had been the Exercise Quantity since
the Date of Grant, but no such adjustment shall affect the number of Warrant
Shares issued upon any exercise of this Warrant prior to the date any such
adjustment is made.
b. Merger, Sale, Reclassification. In case of any (i) consolidation or
merger of the Company with or into another entity (other than a merger or
reorganization (A) in which the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or issuance of any dividend or other distribution of cash,
securities or property to holders of the then outstanding shares of Common
Stock, or (B) resulting solely in a change in par value, or from par value to no
par value, or from no par value to par value, or in a stock split, subdivision
or combination which is the subject of another paragraph in this Section 4),
(ii) sale or other disposition of all or substantially all of the Company's
assets or distribution of property to stockholders (other than distributions
payable out of earnings or retained earnings), or (iii) reclassification, change
or
5
conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of any stock split, subdivision or
combination which is the subject of another paragraph in this Section 4), then
the Company shall take all necessary actions (including but not limited to
executing and delivering to the holder of this Warrant an additional Warrant or
other instrument, in form and substance mutually agreeable to the Company and
the holder of this Warrant) to ensure that the holder of this Warrant shall
thereafter have the right to receive, at a total purchase price not to exceed
that payable upon the exercise of the unexercised portion of this Warrant, and
in lieu of the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon the effectiveness of such consolidation, merger, sale
or other disposition, reclassification, change or conversion by a holder of the
number of shares of Common Stock then purchasable under this Warrant (which, in
the case of such a transaction in which holders of Common Stock were entitled to
elect between different forms of consideration, shall be deemed to be the form
of consideration received by a plurality of the electing holders of Common
Stock). Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.b. shall similarly apply to successive
reclassifications, changes and conversions.
c. Split, Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall split, subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination, effective at the close
of business on the date the split, subdivision or combination becomes effective.
d. Stock Dividends and Other Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Common Stock payable in Common Stock, or (ii) make any other
distribution with respect to Common Stock (except any distribution specifically
provided for in Section 4.b. or Section 4.c. hereof) of Common Stock, then the
Warrant Price shall be adjusted, from and after the date of determination of
stockholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of Fully Diluted Shares immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
Fully Diluted Shares immediately after such dividend or distribution.
e. Rights Offerings. In case the Company shall, at any time after the Date
of Grant, issue to holders of shares of the capital stock of the Company (solely
as a result of such holders' status as stockholders of the Company) any rights,
options or warrants entitling them to subscribe for or purchase shares of Common
Stock (or securities convertible or exchangeable into Common Stock) at a price
per share of Common Stock (or having a conversion or exchange price per share of
Common Stock if a security convertible or exchangeable into Common Stock) less
than the fair market value per share of Common Stock on the record date for such
issuance (or the date of issuance, if there is no record date), the Warrant
Price to be in effect on and after such record date (or issuance date, as the
case may be)
6
shall be adjusted so that it shall equal the price determined by multiplying the
Warrant Price in effect immediately prior to such record date (or issuance date,
as the case may be) by a fraction (i) the numerator of which shall be the number
of Fully Diluted Shares on such record date (or issuance date, as the case may
be) plus the number of shares of Common Stock which the aggregate offering price
of the total number of shares of such Common Stock so to be offered (or the
aggregate initial exchange or conversion price of the exchangeable or
convertible securities so to be offered) would purchase at such fair market
value on such record date (or issuance date, as the case may be) and (ii) the
denominator of which shall be the number of Fully Diluted Shares on such record
date (or issuance date, as the case may be) plus the number of additional shares
of Common Stock to be offered for subscription or purchase (or into which the
convertible securities to be offered are initially exchangeable or convertible).
In case such subscription price may be paid in part or in whole in a form other
than cash, the fair market value of such consideration shall be determined by
the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, provided, that in the event the Board of Directors is unable to make
such a determination or holders of at least fifty-one percent (51%) of the
Warrant Shares issuable under outstanding Investor Warrants disagree in writing
with such determination, then the fair market value of such consideration shall
be determined in the same manner as a Valuation Procedure under Section 4(i)
below. Such adjustment shall be made successively whenever such an issuance
occurs; and in the event that such rights, options, warrants, or convertible or
exchangeable securities are not so issued or are canceled, expire or cease to be
convertible or exchangeable before they are exercised, converted, or exchanged
(as the case may be), then the Warrant Price shall again be adjusted to be the
Warrant Price that would then be in effect if such issuance had not occurred,
but such subsequent adjustment shall not affect the number of Warrant Shares
issued upon any exercise of this Warrant prior to the date such subsequent
adjustment is made.
f. Other Special Distributions. In case the Company shall fix a record date
for the making of a distribution (other than dividends, distributions or
issuances referred to in Section 4(c), Section 4(d) or Section 4(e) above) to
all holders of shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the surviving
corporation) of cash, evidences of indebtedness, assets or subscription rights,
options, warrants, or exchangeable or convertible securities containing the
right to subscribe for or purchase shares of any class of equity securities of
the Company, the Warrant Price to be in effect on and after such record date
shall be adjusted by multiplying the Warrant Price in effect immediately prior
to such record date by a fraction (i) the numerator of which shall be the fair
market value per share of Common Stock on such record date (determined in
accordance with Section 4(i) below), less the cash and/or the fair market value
(as determined by the Board of Directors of the Company in good faith as set
forth in a duly adopted board resolution certified by the Company's Secretary or
Assistant Secretary) of the portion of the assets or evidences of indebtedness
so to be distributed or of such subscription rights, options, warrants, or
exchangeable or convertible securities applicable to one (1) share of the Common
Stock outstanding as of such record date, provided, that in the event the Board
of Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants disagree in writing with such determination, then the fair
market value of such consideration shall be determined in the same
7
manner as a Valuation Procedure under Section 4(i) below, and (ii) the
denominator of which shall be such fair market value per share of Common Stock
as determined in the manner set forth under Section 4(i) below. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Warrant Price shall again be
adjusted to be the Warrant Price which would then be in effect if such record
date had not been fixed, but such subsequent adjustment shall not affect the
number of Warrant Shares issued upon any exercise of this Warrant prior to the
date such subsequent adjustment was made.
g. Other Issuances and Adjustments.
(1) In case the Company or any subsidiary thereof shall, at any time after
the Date of Grant, issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock (excluding (i) shares, rights, options, warrants,
or convertible or exchangeable securities outstanding on the Date of Grant, or
issued in any of the transactions described in Sections 4(b), 4(c), 4(d), 4(e)
or 4(f) above, (ii) shares issued upon the exercise of such rights, options or
warrants or upon conversion or exchange of such convertible or exchangeable
securities, and (iii) up to One Million Nine Hundred Eighty-Nine Thousand
Ninety-One (1,989,091) shares of Common Stock (subject to adjustment for splits,
recapitalizations or similar events) issued, issuable or reserved for issuance
to directors, officers, employees or consultants of the Company or any
subsidiary of its subsidiaries in connection with their services as directors,
officers, employees or consultants pursuant to any stock grant, stock option,
warrant or other similar right issued by the Company and approved by the Board
of Directors of the Company under a stock option or incentive plan duly adopted
and approved by the shareholders of the Company and in existence on the date
hereof), at a price per share of Common Stock (determined in the case of such
rights, options, warrants, or convertible or exchangeable securities by dividing
(x) the total amount received and/or receivable by the Company in consideration
of the sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration payable to the
Company upon exercise, conversion, or exchange thereof by (y) the total maximum
number of shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) less than the fair market value per
share of Common Stock (determined in accordance with Section 4(i) below and in
the case of rights, options, warrants or convertible or exchangeable securities,
determined at the time of issuance of such securities rather than upon exercise
thereof), in each case on the date the Company fixes the offering price of such
shares, rights, options, warrants, or convertible or exchangeable securities,
then the Warrant Price shall be adjusted so that it shall equal the price
determined by multiplying the Warrant Price in effect immediately prior thereto
by a fraction (i) the numerator of which shall be the sum of (A) the number of
Fully Diluted Shares immediately prior to such sale and issuance plus (B) the
number of shares of Common Stock which the aggregate consideration received or
receivable (determined as provided herein) in connection with such sale or
issuance would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of Fully Diluted Shares
immediately after such sale and issuance. Such adjustment shall be made
successively whenever such an issuance is made.
8
(2) In case the Company or any subsidiary thereof shall, at any time after
the Date of Grant, make or agree to (i) any downward adjustment in the exercise,
exchange or conversion price of, (ii) any increase in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of, or (iii) any
change in the consideration payable for the exercise, conversion or exchange of,
any rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or acquire shares of Common Stock, other
than such adjustment that is specifically contemplated and required under the
terms of any such instrument as of the Date of Grant, then the Warrant Price
shall be adjusted so that it shall equal the price determined by multiplying the
Warrant Price in effect immediately prior thereto by a fraction the numerator of
which shall be the sum of (A) the number of Fully Diluted Shares immediately
prior thereto, plus (B) the number of shares of Common Stock to be issued upon
such exercise, conversion or exchange immediately prior thereto, multiplied by
the aggregate amount of the fair market value of the consideration to be
received by the Company upon such exercise, conversion or exchange immediately
thereafter, and the denominator shall be the sum of (X) the number of shares of
Fully Diluted Shares immediately thereafter, plus (Y) the number of shares of
Common Stock to be issued upon such exercise, conversion or exchange immediately
thereafter, multiplied by the aggregate amount of the fair market value of the
consideration to be received by the Company upon such exercise, conversion or
exchange immediately prior thereto. Such adjustment shall be made successively
whenever such an issuance is made.
(3) For the purposes of an adjustment under this Section 4(g), the maximum
number of shares of Common Stock which the holder of any right, option, warrant
or convertible or exchangeable security shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding; furthermore, the
consideration received by the Company therefor shall be deemed to be equal to
the price per share of Common Stock (determined in the case of such rights,
options, warrants, or convertible or exchangeable securities by dividing (x) the
total amount received and/or receivable by the Company in consideration of the
sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration payable to the
Company upon exercise, conversion, or exchange thereof by (y) the total maximum
number of shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) multiplied by the number of shares
deemed issued and outstanding in the previous sentence. In case the Company
shall issue shares of Common Stock, or issue or make an adjustment to the
exercise, exchange or conversion price of rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock for a consideration consisting, in whole or in
part, of consideration other than cash or its equivalent, then in determining
the price per share of Common Stock and the consideration received by the
Company, the Board of Directors of the Company shall determine, in good faith,
the fair market value of said property, and such determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, provided, that in the event the Board of
Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants disagree in writing with such determination, then the fair
market value of such consideration shall be determined in the same manner as a
Valuation Procedure under Section 4(i) below. In case the Company shall issue
shares of Common Stock, or issue or make an adjustment to the exercise or
conversion price of rights,
9
options, warrants, or convertible or exchangeable securities containing the
right to subscribe for or acquire shares of Common Stock, together with one (1)
or more other security as a part of a unit at a price per unit, then in
determining the price per share of Common Stock and the consideration received
or to be by the Company, the Board of Directors of the Company shall determine,
in good faith, which determination shall be described in a duly adopted board
resolution certified by the Company's Secretary or Assistant Secretary, the fair
market value of the rights, options, warrants, or convertible or exchangeable
securities then being sold as part of such unit, provided, that in the event the
Board of Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants disagree in writing with such determination, then the fair
market value of such consideration shall be determined in the same manner as a
Valuation Procedure under Section 4(i) below.
h. Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Warrant Shares purchasable hereunder shall be adjusted, to
the nearest whole share, to the product obtained by multiplying the number of
Warrant Shares purchasable immediately prior to such adjustment in the Warrant
Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
i. Determination of Fair Market Value. For purposes of those provisions of
this Warrant requiring a determination in accordance with this Section 4.i.,
"fair market value" as of a particular date (the "Determination Date") shall
mean (i) if the Common Stock is publicly traded at the time of determination,
the average of the closing prices on such day of the Common Stock on all
domestic securities exchanges on which the Common Stock is then listed, or, if
there have been no sales on any such exchange on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such day
or, if on any such day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted on the NASDAQ system as of 4:00 P.M.,
New York time, on such day, or if on any day such security is not quoted on the
Nasdaq system, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of ten (10) days consisting of the day as of
which "fair market value" is being determined and the nine consecutive business
days prior to such day (provided that, if fair market value is being determined
as of the date of a firm commitment public offering of the Common Stock, fair
market value as of such date shall be the offering price for the Common Stock
subject to such public offering); or (ii) if the Common Stock is not publicly
traded at the time of determination, the Common Stock price per share determined
by dividing Market Value (as defined below) by the number of Fully Diluted
Shares. "Market Value" means the highest price that would be paid for the entire
common equity of the Company on a going-concern basis in an arm's-length
transaction between a willing buyer and a willing seller (neither acting under
compulsion), using valuation techniques then prevailing in the securities
industry (but without giving effect to any discount in respect of a minority
interest) and determined in accordance with the "Valuation Procedure" (as
defined below) and assuming full disclosure and understanding of all relevant
information and a reasonable period of time for effectuating such sale. For the
purposes of determining the "Market Value", (a) the exercise
10
price of options or warrants to acquire Common Stock which are deemed to have
been exercised for the purpose of determining the number of Fully Diluted
Shares, shall be deemed to have been received by the Company, (b)(i) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for the
purpose of determining the issued and outstanding number of Fully Diluted Shares
of Common Stock and (ii) any contractual limitation in respect of the shares of
Common Stock relating to voting rights, shall be deemed to have been eliminated
or canceled and (c) full effect shall be given to any discount that may arise as
the result of the fact that the shares of Common Stock are not publicly traded.
"Valuation Procedure" means, with respect to the determination
of any amount or value required to be determined in accordance with such
procedure, a determination (which shall be final and binding on the Company and
the holders) made (i) by agreement among the Company and the holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants (collectively, the "Requesting Holders") within twenty (20)
days following the event requiring such determination or (ii) in the absence of
such an agreement, by an Independent Financial Expert selected in accordance
with the further provisions of this definition. If required, an Independent
Financial Expert shall be selected within five (5) days following the expiration
of the twenty (20)-day period referred to above, either by agreement among the
Company and the Requesting Holders or, in the absence of such agreement, by lot
from a list of four potential Independent Financial Experts remaining after the
Company nominates three (3), the Requesting Holders nominate three (3), and each
side eliminates one potential Independent Financial Expert. The Independent
Financial Expert shall be instructed by the Company and the Requesting Holders
to make its determination within twenty (20) days of its selection. The fees and
expenses of an Independent Financial Expert selected hereunder shall be paid by
the Company.
"Independent Financial Expert" means a nationally-recognized
investment banking firm (a) that does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company or any holder, (b) that has not been, and, at the time
it is called upon to serve as an Independent Financial Expert under this
Agreement, is not (and none of whose directors, officers, employees or
Affiliates is not), a promoter, director or officer of the Company or any
Holder, (c) that has not been retained during the preceding two years by the
Company or the holder for any purpose, and (d) that is otherwise qualified to
serve as an Independent Financial Advisor. Any such person or entity may receive
customary compensation and indemnification by the Company for opinions or
services it provides as an Independent Financial Expert.
j. Adjustments to Anti-Dilution Rights; Limitations on Subsequent Grants of
Anti-Dilution Rights.
(1) Notwithstanding the foregoing provisions of this Section 4, to the
extent that any holders of equity securities of the Company are entitled to
anti-dilution rights that are superior or more favorable to the holder of such
equity securities than those granted pursuant to this Section 4, the holder
hereof shall be entitled to such anti-dilution rights with respect to the
Warrant Shares.
11
(2) From and after the Date of Grant, the Company shall not, without the
prior written consent of the holders of at least fifty-one percent (51%) of the
Warrant Shares issuable under outstanding Investor Warrants, grant any holders
of equity securities of the Company anti-dilution rights with respect to such
equity securities that are superior or more favorable than those granted
pursuant to this Section 4.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall deliver to holder 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 Warrant Shares
purchasable hereunder after giving effect to such adjustment, which certificate
shall be mailed (without regard to Section 11 hereof, by first class mail,
postage prepaid) to the holder within five (5) days of the date of determination
of such adjustment.
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
(as determined in accordance with Section 4.i. above) of a share of Common Stock
on the date of exercise.
7. Compliance with Securities Act; Disposition of Warrant or Warrant
Shares.
a. Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the shares of Common Stock 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 the Warrant
Shares except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). Upon exercise of this Warrant,
unless the Warrant Shares to be received upon such exercise are intended to be
included in a registration statement under the Act, the holder hereof shall
confirm in writing, by executing the form attached as Schedule 1 to Exhibit A
hereto, that the shares of Common Stock so received are being acquired for
investment and not with a view toward distribution or resale in violation of the
Act. All shares of Common Stock issued upon exercise of this Warrant (unless
registered under the Act 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) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES), (iv) UNLESS PURSUANT
TO AN EXEMPTION THEREFROM UNDER RULE 144 (OR ANY SUCCESSOR
PROVISION) OF THE ACT OR (v) OTHERWISE COMPLYING WITH THE
PROVISIONS OF
12
SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE
ISSUED DIRECTLY OR INDIRECTLY."
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 resale in connection with any "distribution" thereof for
purposes of the Act in violation of the Act. The holder acknowledges that such
holder, or such holder's representatives, if any, has been given access to
information about the Company, through written material provided in or attached
to the Financing Agreement, and through meetings with representatives of the
Company, and has had an opportunity to verify the accuracy of such information,
to ask questions of the Company's officers and directors, and has received
answers to such holder's satisfaction. The holder understands that the valuation
and terms of this Warrant has been made solely through and upon negotiations
between the Company and the holder, and not by an independent accountant,
auditor, investment banker or third party. The holder represents that such
holder has evaluated the fairness of the terms and conditions of this Warrant to
the extent he, she or it has deemed necessary. In making a decision to purchase
this Warrant, the holder has relied solely on the information contained or
referred to herein and upon independent investigations made by such holder in
its discretion. In addition, the holder is not purchasing the Warrant as a
result or subsequent to: (1) any advertisement, article, notice, or other
publication published in any newspaper, magazine, or similar broadcast media
over the internet, television, or radio; or (2) any seminar or meeting whose
attendees, including the holder, were invited as a result of, subsequent to, or
pursuant to, any general solicitation.
(2) The holder understands that this Warrant and the Warrant Shares have
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 understands that this Warrant and the Warrant Shares may be
held indefinitely unless subsequently registered under the Act and any
applicable state securities laws, or unless exemptions from registration are
otherwise available.
(4) The holder is aware of the provisions of Rule 144 promulgated under the
Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three (3)-month
period not exceeding the specified limitations stated therein.
13
(5) The holder understands that at the time such holder wishes to sell this
Warrant and the Warrant Shares there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144, and
that, in such event, the holder may be precluded from selling this Warrant and
the Warrant Shares under Rule 144 even if the one (1)-year minimum holding
period had been satisfied.
b. Disposition of Warrant or Warrant Shares. This Warrant and the Warrant
Shares may be detached and sold or otherwise transferred, in whole or in part,
separately from the Loans made pursuant to the Financing Agreement. With respect
to any offer, sale or other disposition of this Warrant, or any Warrant Shares
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or Warrant Shares, the holder hereof and each subsequent holder of this
Warrant agrees to deliver, prior to the registration of any such transfer, a
written opinion of such holder's counsel (which may be in-house counsel for such
holder), if reasonably requested by the Company, to the effect that the sale or
other disposition of this Warrant or the Warrant Shares, as the case may be, may
be effected without registration under the Act. If a determination has been made
pursuant to this Section 7.b. that the opinion of counsel for the holder is not
reasonably satisfactory to the Company, the Company shall so notify the holder
in writing promptly after such determination has been made (but in any event no
more than two business days thereafter). The foregoing notwithstanding, this
Warrant or the Warrant Shares, as the case may be, may, as to such federal laws,
be offered, sold or otherwise disposed of in accordance with Rule 144 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 have been satisfied. Each certificate representing this
Warrant or the Warrant Shares thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless based on
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 or, if acting as its own transfer agent, the
Company may stop transfer on its corporate books, in connection with such
restrictions.
8. Rights as Stockholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to stockholders 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 Warrant
Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein. The foregoing notwithstanding, 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 stockholders.
14
9. 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 Warrant 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 nonassessable and are not subject to any
preemptive right of any stockholder of the Company;
c. The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the holders thereof are as set forth in the
certificate of incorporation of the Company, as amended to the Date of Grant (as
so amended, the "Charter"), a true and complete copy of which has been delivered
by the Company to the original holder of this Warrant;
d. The execution and delivery of this Warrant are not, and the issuance and
delivery of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the charter or by-laws of the
Company, do not and will not contravene, in any material respect, any
governmental rule or regulation, judgment or order applicable to the Company, 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. This
Warrant and the Warrant Shares are not and will not, be subject to any voting
trust agreement or other contract, agreement, arrangement, commitment or
understanding to which the Company is a party, including such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting or disposition thereof, other than the Registration Rights Agreement;
e. 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;
f. As of the Date of Grant, the authorized capital stock of the Company (of
all classes and series, including Common Stock and preferred stock), the par
value thereof, and the issued and outstanding amounts thereof, are as set forth
on Schedule 9.f. hereof. The issuance and sale of all such interests was in
compliance with all applicable federal and state securities laws, and all issued
and outstanding shares of capital stock of the Company are duly
15
authorized, validly issued, fully paid, and non-assessable. Other than the
Warrants, and other than as specified on Schedule 9.f. hereof, as of the Date of
Grant there are no preemptive rights or any outstanding subscriptions, options,
warrants, rights, convertible securities, calls or other agreements,
arrangements or commitments (including, without limitation, registration rights
agreements and anti-dilution rights) relating to the issued or unissued shares
of the Company's capital stock or other securities, including any right of
conversion or exchange under any outstanding security or other instrument. Other
than the Registration Rights Agreement, the Warrants and any shares of Common
Stock issued upon exercise of the Warrants are not and will not be subject to
any voting trust agreement or other contract, agreement, arrangement, commitment
or understanding to which the Company is a party, including any such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting or disposition thereof. There are not any outstanding bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth on Schedule 9.f., as of the Date of Grant, there are not any securities,
options, warrants, calls, rights, convertible or exchangeable securities or
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by which any of them is bound
obligating the Company or any of its subsidiaries to issue, deliver or sell or
create, or cause to be issued, delivered or sold or created, additional shares
of capital stock or other voting securities or stock equivalents of the Company
or any of its subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or understanding. As of the Date of
Grant, other than as specified on Schedule 9.f. hereof, the Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any security convertible
into or exchangeable for any of its capital stock.
10. Modification and Waiver. Subject to Section 20, 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.
11. Notices. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to a number provided to a party specifically for such
purposes, and facsimile confirmation of receipt is obtained promptly after
completion of transmission, (iii) on the day after delivery to Federal Express
or similar overnight courier, or (iv) on the fifth day after mailing, if mailed
to the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested, to
each such holder or to the Company at the address indicated therefor on the
signature page of this Warrant. Any party hereto may change its address for
purposes of this Section 11 by giving the other party written notice of the new
address in the manner set forth herein.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or
16
substantially all of the Company's assets, and all of the obligations of the
Company relating to the Common Stock 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. The Company
will, at the time of the exercise or conversion of this Warrant, in whole or in
part, upon request of the holder hereof but at the Company's expense,
acknowledge in writing its continuing obligation to the holder hereof in respect
of any rights to which the holder hereof shall continue to be entitled after
such exercise or conversion in accordance with this Warrant; provided, however,
that the failure of the holder hereof to make any such request shall not affect
the continuing obligation of the Company to the holder hereof in respect of such
rights.
13. 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 loss, theft or destruction, upon
receipt of an executed lost securities bond or 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 promptly
(but in no event more than three business days) 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.
14. 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.
15. Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by, and construed in accordance with, the laws of the
State of New York applicable to contracts made and to be performed entirely
within such State, regardless of the law that might be applied under principles
of conflicts of law.
16. Survival of Representations, Warranties and Agreements. Each of the
respective 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) and the termination or expiration of any
rights hereunder. Each of the respective agreements of each of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
17. Remedies. In case any one (1) 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.
18. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
19. 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
17
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.
20. Amendment. This Warrant may be amended by the signed, written agreement
of the Company and holders of holding at least fifty-one percent (51%) of the
Investor Warrants, collectively and on an as-exercised basis, and such amendment
shall be binding on all holders of this Warrant or Warrant Shares; provided,
however, that the consent of all holders of Warrants affected by any amendment
will be required for an amendment pursuant to which (i) the Warrant Price is
increased, (ii) the number of Warrant Shares purchasable upon exercise of this
Warrant is decreased (other than pursuant to any adjustments provided herein),
(iii) the Expiration Date is changed, or (iv) any right of the holder is
adversely impacted in a manner different than the other holders of Investor
Warrants.
21. Registration Rights Agreement. The Company shall provide to the holder
hereof, upon written request at any time, a true copy of the Registration Rights
Agreement, as amended and modified to date.
[Signature page follows.]
18
[SIGNATURE PAGE TO WARRANT]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the day and
year first above written.
COMPANY: CFI PROSERVICES, INC.,
an Oregon corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address: ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[Signature page continues]
EXHIBIT A
NOTICE OF EXERCISE
To: CFI ProServices, Inc.
1. The undersigned hereby elects to purchase _____ shares of Common Stock
of ______________________ pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said 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 in violation of
the Securities Act of 1933, as amended. In support thereof, the undersigned has
executed an Investment Representation Statement attached hereto as Schedule 1.
_________________________ (Signature) __________________(Date)
4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
------------------------------
5. I elect to convert this Warrant pursuant to the cashless Conversion
Right described in Section 2.c. of the Warrant Agreement for ____________
Warrant Shares (as such term is defined therein). ___ (check here)
Date: _________________________
By: (Warrantholder)
Name: (Print)
Its:
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: CFI ProServices, Inc.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities
(the "Registrable Securities"), the undersigned (the "Purchaser") represents to
the Company as follows:
(a) The Purchaser 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 to acquire the Registrable Securities. The
Purchaser is purchasing the Registrable Securities for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Securities Act of 1933, as
amended (the "Act").
(b) The Purchaser understands that the Registrable Securities have 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
Purchaser's investment intent as expressed herein.
(c) The Purchaser further understands that the Registrable Securities may
be held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise available. In addition, the Purchaser
understands that the certificate evidencing the Registrable Securities will be
imprinted with the legend referred to in the Warrant under which the Registrable
Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Registrable Securities there may be no public market upon which to make such
a sale, and that, even if such a public market then exists, the Company may not
be satisfying the current public information requirements of Rule 144, and that,
in such event, the Purchaser may be precluded from selling the Registrable
Securities under Rule 144 even if the one-year minimum holding period had been
satisfied.
Purchaser:
SCHEDULE OF WARRANTS TO PURCHASE SHARES OF COMMON STOCK
-------------------------------------------------------
Number of
Holder Shares
--------------------------------------------------------- ----------
Abelco Holdings LLC, a Delaware limited liability company 190,911
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Capital Partners, II, L.P., a California
limited partnership 127,274
Foothill Partners III, L.P., a Delaware limited partnerhip 63,637
-------
Total 381,822
=======