1
EXHIBIT 4.2
FORM OF WARRANT
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
[COMPANY]
Expires __, 20__
No.: W-_ Number of Shares: _____
Date of Issuance: __, 20__
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, __________________, a ___________ corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that ___________________
or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, up to _____ shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock (the "Common Stock") of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., eastern time, on __, 20__, three years from the date
of issuance (such period being the "Term").
2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such ▇▇▇▇▇▇'s election (i) by certified or official bank
check or (ii) by surrender to the
2
Issuer for cancellation of a portion of this Warrant representing that number of
unissued shares of Warrant Stock which is equal to the quotient obtained by
dividing (A) the product obtained by multiplying the Warrant Price by the number
of shares of Warrant Stock being purchased upon such exercise by (B) the
difference obtained by subtracting the Warrant Price from the Per Share Market
Value as of the date of such exercise, or (iii) by a combination of the
foregoing methods of payment selected by the Holder of this Warrant. In any case
where the consideration payable upon such exercise is being paid in whole or in
part pursuant to the provisions of clause (ii) of this subsection (b), such
exercise shall be accompanied by written notice from the Holder of this Warrant
specifying the manner of payment thereof and containing a calculation showing
the number of shares of Warrant Stock with respect to which rights are being
surrendered thereunder and the net number of shares of Common Stock to be issued
after giving effect to such surrender.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Transferability of Warrant. Subject to Section 2(e), this Warrant
may be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this subsection and subject to the provisions of subsection (e) of
this Section 2, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder executing an assignment in the form attached hereto) and upon payment of
any necessary transfer tax imposed upon such transfer. This Warrant is
exchangeable at the principal office of the Issuer for Warrants for the purchase
of the same aggregate number of shares of Warrant Stock, each new Warrant to
represent the right to purchase such number of shares of Warrant Stock as the
Holder hereof shall designate at the time of such exchange. All Warrants issued
on transfers or exchanges shall be dated the Original Issue Date and shall be
identical with this Warrant except as to the number of shares of Warrant Stock
issuable pursuant hereto.
(e) Compliance with Securities Laws. The Holder of this Warrant, by
acceptance hereof, acknowledges that this Warrant or the shares of Warrant Stock
to be issued upon exercise hereof are being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Warrant Stock to be issued upon exercise hereof except pursuant to an
effective registration statement, or an exemption from registration, under the
Securities Act and any applicable state securities laws.
(f) Continuing Rights of ▇▇▇▇▇▇. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the written request of the
Holder hereof, acknowledge in
-2-
3
writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant; provided that if any such
Holder shall fail to make any such request, the failure shall not affect the
continuing obligation of the Issuer to afford such rights to such Holder.
3. Stock Fully Paid; Reservation; Listing of Shares; Covenants; Ten
Percent Rule; Loss, Theft, Destruction of Warrants.
(a) Stock Fully Paid; Reservation. The Issuer represents, warrants,
covenants and agrees that all shares of Warrant Stock which may be issued upon
the exercise of this Warrant or otherwise hereunder will, upon issuance, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes and liens, security interest, charges and encumbrances of any nature
whatsoever created by or through the Issuer. The Issuer further represents,
warrants, covenants and agrees that during the period within which this Warrant
may be exercised, the Issuer 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 Common Stock to provide for the exercise of this Warrant.
(b) Listing of Shares. If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered. If the Issuer shall list any shares of
Common Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder, and, to the extent permissible under the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(c) Covenants. The Issuer will (i) not permit the par value, if any, of
its Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, security interests,
charges, claims, encumbrances and restrictions (other than as provided herein or
created by the Holders hereof) upon the exercise of this Warrant, and (iv)
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the
-3-
4
case of any such loss, theft or destruction, upon receipt of indemnity or
security satisfactory to the Issuer or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Issuer will make and deliver, in
lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like
tenor and representing the right to purchase the same number of shares of Common
Stock.
4. Adjustment of Warrant Price and Warrant Share Number. 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 happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of
the following (each, a "Triggering Event"): (a) consolidate with or
merge into any other Person and the Issuer shall not be the continuing
or surviving Person of such consolidation or merger, or (b) permit any
other Person to consolidate with or merge into the Issuer and the Issuer
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, any Capital Stock of the Issuer shall be
changed into or exchanged for Securities of any other Person or cash or
any other property, or (c) transfer all or substantially all of its
properties or assets to any other Person, or (d) effect a capital
reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant shall be entitled upon the exercise
hereof at any time after the consummation of such Triggering Event, to
the extent this Warrant is not exercised prior to such Triggering Event,
to receive at the Warrant Price in effect at the time immediately prior
to the consummation of such Triggering Event in lieu of the Common Stock
issuable upon such exercise of this Warrant prior to such Triggering
Event, the Securities, cash and property to which such Holder would have
been entitled upon the consummation of such Triggering Event if such
Holder had exercised the rights represented by this Warrant immediately
prior thereto, subject to adjustments (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments provided for
in Section 4 hereof or (y) to sell this Warrant (or, at such Holder's
election, a portion hereof) concurrently with the Triggering Event to
the Person continuing after or surviving such Triggering Event, or to
the Issuer (if Issuer is the continuing or surviving Person) at a sales
price equal to the amount of cash, property and/or Securities to which a
holder of the number of shares of Common Stock which would otherwise
have been delivered upon the exercise of this Warrant would have been
entitled upon the effective date or closing of any such Triggering Event
(the "Event Consideration"), less the amount or portion of such Event
Consideration having a fair value equal to the aggregate Warrant Price
applicable to this Warrant or the portion hereof so sold.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior
to the consummation thereof, each Person (other than the Issuer) which
may be required to deliver any Securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (A)
-4-
5
the obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such Triggering Event, such assumption
shall be in addition to, and shall not release the Issuer from, any
continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of Securities, cash or
property as, in accordance with the foregoing provisions of this
subsection (a), such Holder shall be entitled to receive, and such
Person shall have similarly delivered to such Holder an opinion of
counsel for such Person, which counsel shall be reasonably satisfactory
to such Holder, stating that this Warrant shall thereafter continue in
full force and effect and the terms hereof (including, without
limitation, all of the provisions of this subsection (a)) shall be
applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of
any rights pursuant hereto.
(iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of
subparagraph (i) of this subsection (a) to sell this Warrant or a
portion thereof, the Issuer agrees that as a condition to the
consummation of any such Triggering Event the Issuer shall secure such
right of Holder to sell this Warrant to the Person continuing after or
surviving such Triggering Event and the Issuer shall not effect any such
Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause
(y) are delivered to the Holder of this Warrant. The obligation of the
Issuer to secure such right of the Holder to sell this Warrant shall be
subject to such Holder's cooperation with the Issuer, including, without
limitation, the giving of reasonable and customary representations and
warranties to the purchaser in connection with any such sale. Prior
notice of any Triggering Event shall be given to the Holder of this
Warrant in accordance with Section 11 hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that
-5-
6
price determined by multiplying the Warrant Price in effect immediately
prior to such record date (or if no such record is taken, then
immediately prior to such payment or other distribution), by a fraction
(1) the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution,
and (2) the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such dividend or distribution
(plus in the event that the Issuer paid cash for fractional shares, the
number of additional shares which would have been outstanding had the
Issuer issued fractional shares in connection with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any distribution of
its assets upon or with respect to (including, but not limited to, a
distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other
than as described in clause (i) of this subsection (c)), or in the event
that the Issuer shall offer options or rights to subscribe for shares of
Common Stock, or issue any Common Stock Equivalents, to all of its
holders of Common Stock, then on the record date for such payment,
distribution or offer or, in the absence of a record date, on the date
of such payment, distribution or offer, the Holder shall receive what
the Holder would have received had it exercised this Warrant in full
immediately prior to the record date of such payment, distribution or
offer or, in the absence of a record date, immediately prior to the date
of such payment, distribution or offer.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at any
time while this Warrant is outstanding, shall issue any Additional Shares of
Common Stock (otherwise than as provided in the foregoing subsections (a)
through (c) of this Section 4), at a price per share less than the Warrant Price
then in effect or less than the Per Share Market Value then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price (rounded to the nearest cent) determined by multiplying the
Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock plus (B) the number
of shares of Common Stock (rounded to the nearest whole share) which the
aggregate consideration for the total number of such Additional Shares
of Common Stock so issued would purchase at a price per share equal to
the greater of the Per Share Market Value then in effect and the Warrant
Price then in effect, and
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made
-6-
7
pursuant to subsection (e) of this Section 4 or (y) no adjustment was required
pursuant to subsection (e) of this Section 4. No adjustment of the Warrant Price
shall be made under this subsection (d) in an amount less than $.01 per share,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment, if any, which together
with any adjustments so carried forward shall amount to $.01 per share or more;
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time
while this Warrant is outstanding, shall issue any Common Stock Equivalent and
the price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
Warrant Price then in effect or less than the Per Share Market Value then in
effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
Warrant Price or less than the Per Share Market Value in effect at the time of
such amendment, then the Warrant Price upon each such issuance or amendment
shall be adjusted as provided in the first sentence of subsection (d) of this
Section 4 on the basis that (1) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued (whether or not such Common Stock Equivalents are
actually then exercisable, convertible or exchangeable in whole or in part) as
of the earlier of (A) the date on which the Issuer shall enter into a firm
contract for the issuance of such Common Stock Equivalent, or (B) the date of
actual issuance of such Common Stock Equivalent, and (2) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum consideration received or receivable by the Issuer
for the issuance of such Additional Shares of Common Stock pursuant to such
Common Stock Equivalent. No adjustment of the Warrant Price shall be made under
this subsection (e) upon the issuance of any Convertible Security which is
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustment shall previously have been made in
the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e). If no adjustment is required under this
subsection (e) upon issuance of any Common Stock Equivalent or once an
adjustment is made under this subsection (e) based upon the Per Share Market
Value in effect on the date of such adjustment, no further adjustment shall be
made under this subsection (e) based solely upon a change in the Per Share
Market Value after such date.
(f) Purchase of Common Stock by the Issuer. If the Issuer at any time
while this Warrant is outstanding shall, directly or indirectly through a
Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value then
in effect, then the Warrant Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares
-7-
8
of Common Stock so purchased, redeemed or acquired would purchase at the Per
Share Market Value; and (ii) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such purchase, redemption
or acquisition. For the purposes of this subsection (f), the date as of which
the Per Share Market Value shall be computed shall be the earlier of (x) the
date on which the Issuer shall enter into a firm contract for the purchase,
redemption or acquisition of such Common Stock, or (y) the date of actual
purchase, redemption or acquisition of such Common Stock. For the purposes of
this subsection (f), a purchase, redemption or acquisition of a Common Stock
Equivalent shall be deemed to be a purchase of the underlying Common Stock, and
the computation herein required shall be made on the basis of the full exercise,
conversion or exchange of such Common Stock Equivalent on the date as of which
such computation is required hereby to be made, whether or not such Common Stock
Equivalent is actually exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4. The
following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received by the
Issuer shall be deemed to be the following: to the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents shall
be issued for a cash consideration, the consideration received by the
Issuer therefor, or if such Additional Shares of Common Stock or Common
Stock Equivalents are offered by the Issuer for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Common Stock Equivalents are sold to underwriters or dealers for public
offering without a subscription offering, the public offering price, in
any such case excluding any amounts paid or receivable for accrued
interest or accrued dividends and without deduction of any compensation,
discounts, commissions, or expenses paid or incurred by the Issuer for
or in connection with the underwriting thereof or otherwise in
connection with the issue thereof; to the extent that such issuance
shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the fair market value of such
consideration at the time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Issuer for issuing such Common Stock
Equivalents, plus the additional consideration payable to the Issuer
upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Capital Stock of the
Issuer other than Common Stock, the Issuer shall be deemed to have
received for such Additional Shares of Common Stock or Common Stock
Equivalents a consideration equal to the amount of such dividend so paid
or satisfied. In any case in which the consideration to be received or
paid shall be other than cash, the Board shall notify the Holder of this
Warrant of its determination of the fair market value of such
consideration prior to payment or accepting receipt thereof. If, within
thirty (30) days after receipt of said notice, the Majority Holders
shall notify the Board in writing of their objection to such
determination, a determination of the fair market value of such
consideration shall be made by an Independent Appraiser selected by the
Majority
-8-
9
Holders with the approval of the Board (which approval shall not be
unreasonably withheld), whose fees and expenses shall be paid by the
Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of shares
of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Warrant Price made pursuant to the provisions
of this Section 4 after the issuance of such Common Stock Equivalent)
had the adjustment of the Warrant Price been made in accordance with the
issuance or sale of the number of Additional Shares of Common Stock
actually issued upon conversion, exchange or issuance of such Common
Stock Equivalent and thereupon only the number of Additional Shares of
Common Stock actually so issued shall be deemed to have been issued and
only the consideration actually received by the Issuer (computed as in
clause (i) of this subsection (g)) shall be deemed to have been received
by the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common Stock
at any time outstanding shall (A) not include any shares thereof then
directly or indirectly owned or held by or for the account of the Issuer
or any of its Subsidiaries, and (B) be deemed to include all shares of
Common Stock outstanding as of such time, all shares of Common Stock
then issuable upon conversion, exercise or exchange of any then
outstanding Common Stock Equivalents or any other evidences of
Indebtedness, shares of Capital Stock or other Securities which are or
may be at any time convertible into or exchangeable for shares of Common
Stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (g) of
this Section 4, inclusive, and the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.
(i) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
-9-
10
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(j) Form of Warrant after Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten (10) days after receipt of notice from
such Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty (30) days after submission
to it of such dispute. Such opinion shall be final and binding on the parties
hereto. The fees and expenses of such accounting firm shall be paid by the
Issuer if the Issuer's calculation of the adjustment was incorrect.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with an exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common Stock
issued by the Issuer after the Original Issue Date, and all shares of
Other Common, if any, issued by the Issuer after the Original Issue
Date, except: (i) the Warrant Stock, (ii) any shares of Common Stock
issued pursuant to the Purchase Agreement, (iii) Common Stock issued to
licensors of technology and lending and leasing institutions, (iv)
Common Stock issued to equipment lessors, banks and other financial
institutions providing borrowing facilities to the Issuer, (v) shares of
Common Stock or options therefor issuable or issued to employees,
consultants, directors or vendors (if in transactions with primarily
non-financing purposes) of the Issuer directly or pursuant to a stock
option plan, or (vi) Common Stock issued pursuant to the acquisition by
the Issuer of another
-10-
11
entity by means of any transaction or series of related transactions or
the purchase of all or substantially all of the assets of such entity.
"Alternate Market" means the Nasdaq Small Cap Market, the American
Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board,
whichever is at the time the principal trading exchange or market for
the Common Stock.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership, (iii)
all membership interests or limited liability company interests in any
limited liability company, and (iv) all equity or ownership interests in
any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation, as amended, of the Issuer as in effect on the Original
Issue Date, and as hereafter from time to time amended, modified,
supplemented or restated in accordance with the terms hereof and thereof
and pursuant to applicable law.
"Common Stock" means the Common Stock, $.001 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or warrant,
option or other right to subscribe for or purchase any Additional Shares
of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness, shares of
Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for Additional Shares of Common Stock.
The term "Convertible Security" means one of the Convertible Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Issuer) that is regularly
engaged in the business of appraising the Capital Stock or assets of
corporations or other entities as going concerns, and which is not
affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means ______________, a ___________ corporation, and its
successors.
-11-
12
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under
the Warrants at the time outstanding.
"Original Issue Date" means [__], 20__.
"Other Common Stock" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the
Nasdaq National Market or an Alternate Market or if there is no such
price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the
Common Stock is not then listed on the Nasdaq National Market or an
Alternate Market, then the average of the "Pink Sheet" quotes for the
relevant conversion period, as determined in good faith by the Holder,
or (c) if the Common Stock is not then publicly traded the fair market
value of a share of Common Stock as determined by an Independent
Appraiser selected in good faith by the Majority Holders; provided,
however, that the Issuer, after receipt of the determination by such
Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Independent
Appraiser; and provided, further that all determinations of the Per
Share Market Value shall be appropriately adjusted for any stock
dividends, stock splits or other similar transactions during such
period. The determination of fair market value by an Independent
Appraiser shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties.
In determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the
Common Stock imposed by agreement or by federal or state securities
laws, or to the existence or absence of, or any limitations on, voting
rights.
"Purchase Agreement" means the Common Stock Purchase Agreement dated
as of ________ __, 2000 between the Issuer and _________, a company
organized under the laws of ________________.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for securities or a security, and any option, warrant or
other right to purchase or acquire any security. "Security" means one of
the Securities.
-12-
13
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries, or by the Issuer and one
or more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means a day on which the Common Stock is traded on
the Nasdaq National Market or an Alternate Market; provided, however,
that in the event that the Common Stock is not listed or quoted as
hereinbefore set forth, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Voting Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) having
ordinary voting power for the election of a majority of the members of
the Board of Directors (or other governing body) of such corporation,
other than Capital Stock having such power only by reason of the
happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and any
other warrants of like tenor issued in substitution or exchange for any
thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof
or of any of such other Warrants.
"Warrant Price" means $_______, as such price may be adjusted from
time to time as shall result from the adjustments specified in Section 4
herein.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the terms
hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of
Common Stock; or
(B) the Issuer shall authorize the granting to all holders of
its Common Stock of rights to subscribe for or purchase any
shares of Capital Stock of any class or of any Common Stock
Equivalents or Convertible Securities or other rights; or
-13-
14
(C) there shall be any reclassification of the Capital Stock of
the Issuer; or
(D) there shall be any capital reorganization by the Issuer; or
(E) there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or
substantially all of the Issuer's property, assets or
business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares
of Capital Stock shall continue to be outstanding and
unchanged and except a consolidation, merger, sale, transfer
or other disposition involving a wholly-owned Subsidiary);
or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial
liquidation of the Issuer or distribution to holders of
Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than twenty (20) days
prior to the record date or the date on which the Issuer's transfer books are
closed in respect thereto. The Issuer shall give to the Holder notice of all
meetings and actions by written consent of its stockholders, at the same time in
the same manner as notice of any meetings of stockholders is required to be
given to stockholders who do not waive such notice (or, if such actions require
no notice, then two (2) Trading Days written notice thereof describing the
matters upon which action is to be taken). The Holder shall have the right to
send two representatives selected by it to each meeting of stockholders, who
shall be permitted to attend, but not vote at, such meeting of stockholders and
any adjournments thereof. This Warrant entitles the Holder to receive, upon
request, copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
-14-
15
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW. THIS WARRANT SHALL NOT BE INTERPRETED OR
CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS WARRANT TO BE
DRAFTED.
11. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern standard time,
on a Trading Day, (ii) the Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., eastern standard time, on any
date and earlier than 11:59 p.m., eastern standard time, on such date, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
[COMPANY]
[ADDRESS]
Tel. No.:
Fax No.:
Attention:
or to such other address or addresses or facsimile number or numbers as
any such party may most recently have designated in writing to the other parties
hereto by such notice.
Copies of notices to the Issuer shall be sent to:
[COMPANY'S COUNSEL]
[ADDRESS]
Tel. No.:
Fax No.:
Attention:
12. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such
-15-
16
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
party.
15. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-16-
17
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
[COMPANY]
By: ___________________________________
Name:
Title:
-17-
18
EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the
within Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature ________________________________
Address __________________________________
__________________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and
transfers unto __________________ the within Warrant and all rights evidenced
thereby and does irrevocably constitute and appoint _____________, attorney, to
transfer the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ________________________________
Address __________________________________
__________________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and
transfers unto __________________ the right to purchase _________ shares of
Warrant Stock evidenced by the within Warrant together with all rights therein,
and does irrevocably constitute and appoint ___________________, attorney, to
transfer that part of the said Warrant on the books of the within named
corporation.
Dated: _________________ Signature ________________________________
Address __________________________________
__________________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-__ canceled (or transferred or exchanged) this _____
day of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-__ issued for ____ shares of Common Stock in the
name of _______________.
-18-
