EXHIBIT A
to Securities
Purchase
Agreement
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PREPAID COMMON STOCK PURCHASE WARRANT
September 28, 1998 Right to Purchase $_________ of
Common Stock, par value $.001 per share
FOR VALUE RECEIVED, THE NETPLEX GROUP, INC., a corporation organized
under the laws of the State of New York (hereinafter called the "Corporation")
hereby promises to issue to _______________ or its registered assigns (the
"Holder"), at any time or from time to time upon its receipt of a Notice of
Exercise (as defined in Article I.C below), up to _________________________
Dollars ($________) (the "Prepaid Amount") of the Corporation's common stock,
par value $.001 per share (the "Common Stock"), in the manner provided in
Article II hereof. This Warrant is being issued by the Corporation along with
similar prepaid common stock purchase warrants (the "Other Prepaid Warrants"
and, together with this Warrant, the "Prepaid Warrants") pursuant to that
certain Securities Purchase Agreement, dated as of September 25, 1998, by and
among the Corporation, the Holder and the other parties named therein (the
"Securities Purchase Agreement").
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PREPAID COMMON STOCK PURCHASE WARRANT
September 28, 1998 Right to Purchase $938,400 of
Common Stock, par value $.001 per share
FOR VALUE RECEIVED, THE NETPLEX GROUP, INC., a corporation organized
under the laws of the State of New York (hereinafter called the "Corporation")
hereby promises to issue to Xxxxxxx Xxxxx Performance Partners, L.P., or its
registered assigns (the "Holder"), at any time or from time to time upon its
receipt of a Notice of Exercise (as defined in Article I.C below), up to Nine
Hundred Thirty Eight Thousand Four Hundred Dollars ($938,400) (the "Prepaid
Amount") of the Corporation's common stock, par value $.001 per share (the
"Common Stock"), in the manner provided in Article II hereof. This Warrant is
being issued by the Corporation along with similar prepaid common stock purchase
warrants (the "Other Prepaid Warrants" and, together with this Warrant, the
"Prepaid Warrants") pursuant to that certain Securities Purchase Agreement,
dated as of September 25, 1998, by and among the Corporation, the Holder and the
other parties named therein (the "Securities Purchase Agreement").
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PREPAID COMMON STOCK PURCHASE WARRANT
September 28, 1998 Right to Purchase $761,600 of
Common Stock, par value $.001 per share
FOR VALUE RECEIVED, THE NETPLEX GROUP, INC., a corporation organized
under the laws of the State of New York (hereinafter called the "Corporation")
hereby promises to issue to Xxxxxxx Sachs Performance Partners (Offshore), L.P.,
or its registered assigns (the "Holder"), at any time or from time to time upon
its receipt of a Notice of Exercise (as defined in Article I.C below), up to
Seven Hundred Sixty One Thousand Six Hundred Dollars ($761,600) (the "Prepaid
Amount") of the Corporation's common stock, par value $.001 per share (the
"Common Stock"), in the manner provided in Article II hereof. This Warrant is
being issued by the Corporation along with similar prepaid common stock purchase
warrants (the "Other Prepaid Warrants" and, together with this Warrant, the
"Prepaid Warrants") pursuant to that certain Securities Purchase Agreement,
dated as of September 25, 1998, by and among the Corporation, the Holder and the
other parties named therein (the "Securities Purchase Agreement").
CERTAIN DEFINITIONS
For purposes hereof, the following terms shall have the following
meanings:
A. "Closing Bid Price" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the aggregate Prepaid Amount represented by the then outstanding Prepaid
Warrants ("Majority Holders") if Bloomberg Financial Markets is not then
reporting closing bid prices of such security (collectively, "Bloomberg"), or if
the foregoing does not apply, the last reported sale price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading date for such security, on
the next preceding date which was a trading date. If the Closing Bid Price
cannot be calculated for such security as of either of such dates on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the Corporation and reasonably acceptable to the Majority Holders,
with the costs of such appraisal to be borne by the Corporation.
B. "Exercise Amount" means the portion of the Prepaid Amount of this
Warrant being exercised and any Exercise Default Payments payable with respect
thereto, each as specified in the notice of exercise in the form attached hereto
(the "Notice of Exercise").
C. "Exercise Date" means, for any Exercise (as defined below), the date
specified in the Notice of Exercise so long as the copy of the Notice of
Exercise is faxed (or delivered by other means resulting in notice) to the
Corporation at or before 11:59 p.m., New York City time, on the Exercise Date
indicated in the Notice of Exercise; provided, however, that if the Notice of
Exercise is not so faxed or otherwise delivered before such time, then the
Exercise Date shall be the date the holder faxes or otherwise delivers the
Notice of Exercise to the Corporation.
D. "Exercise Price" means (i) with respect to any Exercise Date on or
prior to the 365th day after the date of the Closing, 125% of the Fixed Exercise
Price and (ii) with respect to any Exercise Date after the 365th day after the
date of the Closing, the lower of the Fixed Exercise Price and the Variable
Exercise Price, each in effect as of such date and subject to adjustment as
provided herein but not less than the Floor Price, if in effect at the time of
exercise.
E. "Closing Date" means the date of the Closing under Securities
Purchase Agreement.
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F. "Fixed Exercise Price" means $1.3938 (average of the Closing Bid
Prices for the Common Stock during the five (5) consecutive trading day period
ending on the trading day immediately preceding the date of issuance of this
Warrant (the "Issuance Date")), and shall be subject to adjustment as provided
herein.
G. "Variable Exercise Price" means, as of any date of determination,
the amount obtained by multiplying (i) .80 (the "Exercise Percentage") and (ii)
the average of the three (3) lowest Closing Bid Prices for the Common Stock
during the twenty (20) consecutive trading day period ending on the trading day
immediately preceding such date of determination (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such twenty (20) trading day period), and shall be subject to
adjustment as provided herein.
H. "business day" and "trading day" means any day on which the New York
Stock Exchange is open for trading.
I. "Premium" means an amount equal to (.35) x (N/365) x the Prepaid
Amount.
J. "Floor Price" means $1.00 and shall be subject to adjustment as
provided herein, provided, however if (i) the Company does not have earnings per
share of $.01 or more for the calendar quarter ending December 31, 1998 or any
calendar quarter thereafter or (ii) if the Average Daily Volume Amount (as
defined below) is less than $100,000 beginning on April 1, 1999 or thereafter,
then the Exercise Price shall be calculated as if there is no applicable Floor
Price. "Average Daily Volume Amount" shall mean the average for the forty-five
trading days immediately preceding the date of determination of (i) the Closing
Bid Price of the Common Stock for a day, multiplied by (ii) the number of shares
of Common Stock traded on the principal market or exchange on which shares of
Common Stock are traded on such day as reported by The Wall Street Journal.
ARTICLE II
EXERCISE
A. Exercise by the Holder. (i) Subject to the limitations on exercise
contained in Paragraph C of this Article II, the Holder may, at any time and
from time to time, exercise all or any part of the outstanding Prepaid Amount of
this Warrant in accordance with the procedures set forth in Paragraph B of this
Article II for a number of fully paid and nonassessable shares of Common Stock
determined in accordance with the following formula if the Corporation timely
redeems the Premium thereon in cash in accordance with subparagraph (ii) below:
Exercise Amount
---------------
Exercise Price
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or in accordance with the following formula if the Corporation does not timely
redeem the Premium thereon in accordance with subparagraph (ii) below and if the
applicable conversion occurs after the 365th day after the Issuance Date:
Exercise Amount + the Premium
-----------------------------
Exercise Price
(ii) (a) The Corporation shall have the right, in its sole
discretion, upon receipt of a Notice of Exercise, to redeem the Premium subject
to such conversion for a sum of cash equal to the amount of the Premium being so
redeemed. All cash redemption payments hereunder shall be paid in lawful money
of the United States of America at such address for the holder as appears on the
record books of the Corporation (or at such other address as such holder shall
hereafter give to the Corporation by written notice). In the event the
Corporation so elects to redeem the Premium in cash and fails to pay such holder
the applicable redemption amount to which such holder is entitled by depositing
a check in the U.S. Mail to such holder within four (4) business days of receipt
by the Corporation of a Notice of Exercise (in the case of a redemption in
connection with an Optional Conversion), the Corporation shall thereafter
forfeit its right to redeem such Premium in cash and such Premium shall
thereafter be converted into shares of Common Stock in accordance with Article
II.A(i).
(b) Each holder of Warrants shall have the right to require
the Corporation to provide advance notice to such holder stating whether the
Corporation will elect to redeem the Premium in cash pursuant to the
Corporation's redemption rights discussed in subparagraph (a) of this Article
II.A(ii). A holder may exercise such right from time to time by sending notice
(an "Election Notice") to the Corporation, by facsimile, requesting that the
Corporation disclose to such holder whether the Corporation would elect to
redeem the Premium for cash in lieu of issuing shares of Common Stock therefor
if such holder were to exercise its rights to receive shares of Common Stock
pursuant to this Article II.A. The Corporation shall, no later than the close of
business on the second business day following receipt of an Election Notice,
disclose to such holder whether the Corporation would elect to redeem the
Premium in connection with an exercise pursuant to a Notice of Exercise
delivered over the subsequent ten (10) business day period. If the Corporation
does not respond to such holder within such two business day period via
facsimile, the Corporation shall, with respect to any exercise pursuant to a
Notice of Exercise delivered within the subsequent ten (10) business day period,
forfeit its right to redeem such Premium in accordance with subparagraph (a) of
this Article II.A(ii) and shall be required to issue shares of Common Stock as
payment of Premium.
B. Mechanics of Exercise. In order to exercise this Warrant, Holder
shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice of
Exercise to the Corporation and (y) surrender or cause to be surrendered this
Warrant along with a copy of the Notice of Exercise as soon as practicable
thereafter to the Corporation. Upon receipt by the Corporation of a facsimile
copy of a Notice of Exercise from Holder, the Corporation shall immediately
send, via facsimile, a confirmation to Holder stating that the Notice of
Exercise has been received, the date upon which
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the Corporation expects to deliver the Common Stock issuable upon such exercise
and the name and telephone number of a contact person at the Corporation
regarding the exercise. The Corporation shall not be obligated to issue shares
of Common Stock upon an exercise hereof unless either this Warrant is delivered
to the Corporation as provided above, or Holder notifies the Corporation that
this Warrant has been lost, stolen or destroyed (subject to the requirements of
Article IX.G).
(i) Delivery of Common Stock Upon Exercise. The Corporation
shall, on or before the later of (a) the third (3rd) business day following the
Exercise Date and (b) the business day following the date of the Corporation's
receipt of this Warrant (or, if this Warrant is lost, stolen or destroyed, the
date on which indemnity pursuant to Article VIII.G is provided) (the "Delivery
Period"), issue and deliver to the Holder or its nominee (x) that number of
shares of Common Stock issuable upon exercise of the portion of this Warrant
being exercised and (y) a new Warrant in the form hereof representing the
balance of the Prepaid Amount hereof not being exercised, if any. If the
Corporation's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, and so long as the
certificates therefor are not required to bear a legend, the Corporation shall
cause its transfer agent to electronically transmit the Common Stock issuable
upon exercise to the Holder by crediting the account of Holder or its nominee
with DTC through its Deposit Withdrawal Agent Commission system ("DTC
Transfer"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Corporation shall deliver to Holder physical certificates
representing the Common Stock issuable upon such exercise. Further, Holder may
instruct the Corporation to deliver to Holder physical certificates representing
the Common Stock issuable upon such exercise in lieu of delivering such shares
by way of DTC Transfer.
(ii) Taxes. The Corporation shall pay any and all taxes
which may be imposed upon it with respect to the issuance and delivery of the
shares of Common Stock upon the exercise of this Warrant.
(iii) No Fractional Shares. If any exercise of this Warrant
would result in the issuance of a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be the nearest whole number of
shares.
(iv) Exercise Disputes. In the case of any dispute with
respect to an exercise of this Warrant, the Corporation shall promptly issue
such number of shares of Common Stock as are not disputed in accordance with
subparagraph (i) above. The Corporation and the Holder shall seek to resolve any
such dispute in good faith. If such dispute involves the calculation of the
Exercise Price, the Corporation shall immediately submit the disputed
calculations to KPMG Peat Marwick or such other independent outside accountant
of national reputation selected by the Company via facsimile within two (2)
business days of receipt of the Notice of Exercise. The accountant, at the
Corporation's sole expense (except that if the Corporation's calculation is
correct, the Holder shall bear such expense), shall audit the calculations and
notify the Corporation and Holder of the results no later than two (2) business
days from the date it receives the disputed calculations. The
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accountant's calculation shall be deemed conclusive, absent manifest error. The
Corporation shall then issue the appropriate number of shares of Common Stock in
accordance with subparagraph (i) above.
C. Limitations on Exercise. The exercise of this Warrant shall be
subject to the following limitations (each of which limitations shall be applied
independently):
(i) Cap Amount. Unless permitted by the applicable rules
and regulations of the principal securities market on which the Common Stock is
listed or traded, in no event shall the total number of shares of Common Stock
issued upon exercise of the Prepaid Warrants exceed the maximum number of shares
of Common Stock that the Corporation can so issue pursuant to Rules
4310(c)(25)(H) or 4460(i) of the National Association of Securities Dealers
("NASD") (or any successor rules) (the "Cap Amount") which, as of the Closing
Date, shall be 2,039,326 shares (19.99% of the total shares outstanding on the
Closing Date less the maximum number of shares issuable upon the exercise of all
Incentive Warrants (as such term is defined in the Securities Purchase
Agreement) issued and/or issuable pursuant to the Securities Purchase Agreement
and all warrants issued and/or issuable to The Zanett Securities Corporation in
connection with the transactions contemplated by the Securities Purchase
Agreement). The Cap Amount shall be allocated pro-rata to the holders of the
Prepaid Warrants as provided in Article IX.H. In the event the Corporation is
prohibited from issuing shares of Common Stock as a result of the operation of
this subparagraph (i), the Corporation shall comply with Article V.
(ii) No Five Percent Holders. In no event shall Holder be
entitled to receive shares of Common Stock upon an exercise of this Warrant to
the extent that the sum of (x) the number of shares of Common Stock beneficially
owned by Holder and its affiliates (exclusive of shares issuable upon exercise
of the unexercised portion of any Prepaid Warrants or the unexercised or
unconverted portion of any other securities of the Corporation (including,
without limitation, the Incentive Warrants (as defined in the Securities
Purchase Agreement) issued by the Corporation pursuant to the Securities
Purchase Agreement) subject to a limitation on conversion or exercise analogous
to the limitations contained herein) and (y) the number of shares of Common
Stock issuable upon the exercise of the portion of this Warrant with respect to
which the determination of this subparagraph is being made, would result in
beneficial ownership by Holder and its affiliates of more than 4.99% of the then
outstanding shares of Common Stock. For purposes of this subparagraph,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13 D-G thereunder,
except as otherwise provided in clause (x) above. The restriction contained in
this subparagraph (ii) shall not be altered, amended, deleted or changed in any
manner whatsoever unless the holders of a majority of the outstanding shares of
Common Stock and Holder shall approve such alteration, amendment, deletion or
change.
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ARTICLE III
RESERVATION OF SHARES OF COMMON STOCK
A. Reserved Amount. On the Closing Date, the Corporation shall have
reserved 3,000,000 shares (200% of number of shares which would be issuable if
all Prepaid Warrants issued or issuable pursuant to the Securities Purchase
Agreement are exercised in their entirety on the Closing Date) of the authorized
but unissued shares of Common Stock for issuance upon the full exercise of all
Prepaid Warrants issued or issuable pursuant to the Securities Purchase
Agreement (the "Reserved Amount") and thereafter the number of authorized but
unissued shares of Common Stock so reserved shall not be decreased and shall at
all times be sufficient to provide for the full exercise of all Prepaid Warrants
issued or issuable pursuant to the Securities Purchase Agreement at the then
current Exercise Price. The Reserved Amount shall be allocated to the holders of
Prepaid Warrants as provided in Article IX.H.
B. Increases to Reserved Amount. If, at any time after the date hereof,
the Reserved Amount for any three (3) consecutive trading days (the last of such
three (3) trading days being the "Authorization Trigger Date") shall be less
than 135% of the number of shares of Common Stock issuable upon the full
exercise of all Prepaid Warrants issued or issuable pursuant to the Securities
Purchase Agreement, the Corporation shall immediately notify the holders of
Prepaid Warrants of such occurrence and shall take immediate action (including,
if necessary, seeking stockholder approval to authorize the issuance of
additional shares of Common Stock provided the Company shall not be obligated to
hold a meeting with respect to such stockholder approval prior to June 15, 1999)
to increase the Reserved Amount to 200% of the number of shares of Common Stock
then issuable upon the full exercise of all Prepaid Warrants issued or issuable
pursuant to the Securities Purchase Agreement. In the event the Corporation
fails to so increase the Reserved Amount within ninety (90) days after an
Authorization Trigger Date (or on or prior to June 15, 1999 if stockholder
approval is required), and thereafter Holder is unable to exercise all or any
portion of the outstanding Prepaid Amount of this Warrant because the
Corporation does not have a sufficient number of shares of Common Stock
authorized and reserved for issuance upon exercise hereof, Holder shall
thereafter have the option, exercisable at any time by delivery of a Default
Notice (as defined in Article VI.C) to the Corporation, to require the
Corporation to pay to Holder an amount in cash equal to the Default Amount (as
defined in Article VI.B). Upon payment by the Corporation of the Default Amount,
this Warrant shall be null and void. If the Corporation fails to deliver the
Default Amount to Holder within five (5) business days after its receipt of such
Default Notice, then Holder shall be entitled to the remedies provided in
Article VI.C.
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ARTICLE IV
FAILURE TO SATISFY EXERCISES
A. Exercise Default Payments. If, at any time, (x) Holder submits a
Notice of Exercise and the Corporation fails for any reason (other than because
such issuance would exceed Holder's allocated portion of the Reserved Amount or
Cap Amount, for which failures Holder shall have the remedies set forth in
Articles III and V, respectively) to deliver, on or prior to the fourth business
day following the expiration of the Delivery Period for such exercise, such
number of freely tradeable shares of Common Stock to which Holder is entitled
upon such exercise, or (y) the Corporation provides notice to any holder of
Prepaid Warrants (together with all other holders of Prepaid Warrants and the
Holder referred to herein, the "Holders") at any time of its intention not to
issue freely tradeable shares of Common Stock upon the exercise by any Holder of
a Prepaid Warrant in accordance with the terms of the Prepaid Warrants (other
than because such issuance would exceed such Holder's allocated portion of the
Reserved Amount or Cap Amount) (each of (x) and (y) being an "Exercise
Default"), then the Corporation shall pay to Holder, in the case of an Exercise
Default described in clause (x) above, and to all Holders, in the case of a
Exercise Default described in clause (y) above, an amount equal to:
(.24) x (D/365) x (Exercise Default Amount)
where:
"D" means the number of days after the expiration of the Delivery
Period through and including the Default Cure Date;
"Exercise Default Amount" means the Prepaid Amount of all Warrants held
by Holder plus all accrued and unpaid Premium thereon; and
"Default Cure Date" means (i) with respect to an Exercise Default
described in clause (x) of its definition, the date the Corporation effects the
exercise of the portion of this Warrant submitted for exercise, and (ii) with
respect to an Exercise Default described in clause (y) of its definition, the
date the Corporation begins to issue freely tradeable shares of Common Stock in
satisfaction of all exercises of Prepaid Warrants in accordance with their terms
and (iii) with respect to either type of Exercise Default, the date on which the
Corporation pays to Holder the Default Amount (as defined in Article VI.B)
pursuant to Paragraph D of this Article IV.
The payments to which Holder shall be entitled pursuant to this
Paragraph A are referred to herein as "Exercise Default Payments." Holder may
elect to receive accrued Exercise Default Payments in cash or to convert all or
any portion of such accrued Exercise Default Payments, at any time, into Common
Stock at the lowest Exercise Price in effect during the period beginning on the
date of the Exercise Default through the Exercise Date for such exercise. In the
event Holder elects
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to receive any Exercise Default Payments in cash, it shall so notify the
Corporation in writing. Such payment shall be made in accordance with and be
subject to the provisions of Article IX.J. In the event Holder elects to convert
all or any portion of the Exercise Default Payments into Common Stock, Holder
shall indicate on a Notice of Exercise such portion of the Exercise Default
Payments which Holder elects to so convert and such exercise shall otherwise be
effected in accordance with the provisions of Article II.
B. Adjustment to Exercise Price. If Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Delivery Period with respect to an exercise of
any portion of any of Holder's Prepaid Warrants for any reason (other than
because such issuance would exceed Holder's allocated portion of the Reserved
Amount or Cap Amount, for which failures Holder shall have the remedies set
forth in Articles III and V, respectively), then the Fixed Exercise Price in
respect of all Prepaid Warrants held by Holder (including any Prepaid Warrants
or portions thereof submitted to the Corporation for exercise, but for which
shares of Common Stock have not been issued to Holder) shall thereafter be the
lesser of (i) the Fixed Exercise Price on the Exercise Date specified in the
Notice of Exercise which resulted in the Exercise Default and (ii) the lowest
Exercise Price in effect during the period beginning on, and including, such
Exercise Date through and including the day such shares of Common Stock are
delivered to the Holder. If there shall occur an Exercise Default of the type
described in clause (y) of Article IV.A., then the Fixed Exercise Price with
respect to any exercise thereafter shall be the lowest Exercise Price in effect
at any time during the period beginning on, and including, the date of the
occurrence of such Exercise Default through and including the Default Cure Date.
The Fixed Exercise Price shall thereafter be subject to further adjustment for
any events described in Article VII.
C. Buy-In Cure. Unless the Corporation has notified Holder in writing
prior to the delivery by Holder of a Notice of Exercise that the Corporation is
unable to honor exercises, if (i) (a) the Corporation fails for any reason to
deliver during the Delivery Period shares of Common Stock to Holder upon an
exercise of this Warrant or (b) there shall occur a Legend Removal Failure (as
defined in Article VI.A(iii) below) and (ii) thereafter, Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to make delivery in
satisfaction of a sale by Holder of the unlegended shares of Common Stock (the
"Sold Shares") which Holder anticipated receiving upon such exercise (a
"Buy-In"), the Corporation shall pay Holder (in addition to any other remedies
available to Holder) the amount by which (x) Holder's total purchase price
(including brokerage commissions, if any) for the unlegended shares of Common
Stock so purchased exceeds (y) the net proceeds received by Holder from the sale
of the Sold Shares. For example, if Holder purchases unlegended shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for $10,000, the Corporation will be required to
pay Holder $1,000. Holder shall provide the Corporation written notification
indicating any amounts payable to Holder pursuant to this Paragraph C, together
with evidence supporting such calculation. The Corporation shall make any
payments required pursuant to this Paragraph C in accordance with and subject to
the provisions of Article VIII.J.
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D. Right to Require Payment of Default Amount. If the Corporation
fails, and such failure continues uncured for five (5) business days after the
Corporation has been notified thereof in writing by Holder, for any reason
(other than because such issuance would exceed Holder's allocable portion of the
Reserved Amount or Cap Amount, for which failures Holder shall have the remedies
set forth in Articles III and V, respectively) to issue shares of Common Stock
within ten (10) business days after the expiration of the Delivery Period with
respect to any exercise of this Warrant, then Holder may elect at any time prior
to the Default Cure Date for such Exercise Default, by delivery of a Default
Notice (as defined in Article VI.C.) to the Corporation, to require the
Corporation to pay to Holder an amount in cash equal to the Default Amount (as
defined in Article VI.B). Upon payment by the Corporation of the Default Amount,
this Warrant shall be null and void. If the Corporation fails to pay such
Default Amount within five (5) business days after its receipt of a Default
Notice, then Holder shall be entitled to the remedies provided in Article VI.C.
ARTICLE V
INABILITY TO EXERCISE DUE TO CAP AMOUNT
A. Obligation to Cure. If at any time the then unissued portion of any
Holder's Cap Amount is less than 135% of the number of shares of Common Stock
then issuable upon the full exercise of all Prepaid Warrants owned by such
Holder (a "Trading Market Trigger Event"), the Corporation shall immediately
notify the Holders of Prepaid Warrants of such occurrence and shall take
immediate action (including, if necessary, seeking the approval of its
stockholders to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon the full exercise of all Prepaid Warrants
issued or issuable pursuant to the Securities Purchase Agreement but for the Cap
Amount) to eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Corporation or any of
its securities on the Corporation's ability to issue shares of Common Stock in
excess of the Cap Amount. In the event the Corporation fails to eliminate all
such prohibitions within ninety (90) days after the Trading Market Trigger Event
and thereafter Holder is unable to exercise all or any portion of the
outstanding Prepaid Amount of this Warrant as a result of the operation of
Article II.C.(i), then Holder shall thereafter have the option, exercisable at
any time until such date that all such prohibitions are eliminated, by delivery
of a Default Notice (as defined in Article VI.C.) to the Corporation, to require
the Corporation to pay to Holder an amount in cash equal to the Default Amount
(as defined in Article VI.B). Upon payment by the Corporation of the Default
Amount, this Warrant shall be null and void. If the Corporation fails to deliver
the Default Amount within five (5) business days after its receipt of such
Default Notice, then such holder shall be entitled to the remedies provided in
Articles V.B and VI.C.
B. Remedies. If the Corporation fails to pay the Default Amount
pursuant to Article V.A. within five (5) business days after its receipt of such
Default Notice, Holder may elect either or both of the following additional
remedies:
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(i) to require, with the consent of the Majority Holders, the
Corporation to terminate the listing of its Common Stock on the Nasdaq SmallCap
Market (or any other stock exchange, interdealer quotation system or trading
market) and to cause its Common Stock to be eligible for trading on the
over-the-counter electronic bulletin board; or
(ii) to require the Corporation to issue shares of Common
Stock in accordance with Holder's Notice of Exercise at an Exercise Price equal
to the average of the Closing Bid Prices for the Common Stock during the five
(5) consecutive trading days ending on the trading day immediately preceding the
date of Holder's written notice to the Corporation of its election to receive
shares of Common Stock pursuant to this subparagraph (ii) (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such five (5) trading day period).
ARTICLE VI
EVENTS OF DEFAULT
A. Events of Default. If any of the following events of default (each,
an "Event of Default") shall occur:
(i) the Common Stock (including any of the shares of Common
Stock issuable upon exercise of this Warrant) is suspended from trading on any
of, or is not listed (and authorized) for trading on at least one of, the New
York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market for an aggregate of ten (10) trading days in any nine
(9) month period;
(ii) any Registration Statement required to be filed by the
Corporation pursuant to Sections 2(a) or 3(b) of that certain Registration
Rights Agreement by and among the Corporation and the other signatories thereto
entered into in connection with the Securities Purchase Agreement (the
"Registration Rights Agreement") has not been declared effective by the
ninetieth (90th) day following the date on which such Registration Statement is
required to be declared effective pursuant to the Registration Rights Agreement,
or any such Registration Statement, after being declared effective, cannot be
utilized by Holders for the resale of all of its Registrable Securities (as
defined in the Registration Rights Agreement) for an aggregate of more than
thirty (30) days;
(iii) the Corporation fails to remove any restrictive legend
on any certificate or any shares of Common Stock issued to Holder upon exercise
of any Prepaid Warrant owned by Holder as and when required by the Prepaid
Warrants, the Securities Purchase Agreement or the Registration Rights Agreement
(a "Legend Removal Failure"), and any such failure continues uncured for five
(5) business days after the Corporation has been notified thereof in writing by
the holder;
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(iv) the Corporation provides notice to any of the Holders of
Prepaid Warrants, including by way of public announcement, at any time, of its
intention not to issue shares of Common Stock to any of the Holders of Prepaid
Warrants upon exercise in accordance with the terms of the Prepaid Warrants
(other than due to the circumstances contemplated by Articles III or V for which
the Holders shall have the remedies set forth in such Articles);
(v) the Corporation shall:
(a) sell, convey or dispose of all or substantially all of
its assets;
(b) merge, consolidate or engage in any other business
combination with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation, other than pursuant to a merger in which the Corporation is the
surviving or continuing entity and its authorized capital stock is unchanged and
other than pursuant to a merger in which the surviving or continuing entity (if
other than the Corporation) assumes the Corporation's obligations under the
Securities Purchase Agreement, the Prepaid Warrants, the Incentive Warrants and
the Registration Rights Agreement and is a publicly-traded corporation whose
common stock is listed for trading on the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market); or
(c) have fifty percent (50%) or more of the voting power
of its capital stock owned beneficially by one person, entity or "group" (as
such term is used under Section 13(d) of the Securities Exchange Act of 1934, as
amended);
(vi) the Corporation otherwise shall breach any material term
hereunder (other than as specifically provided in subparagraphs (i)-(v) of this
Paragraph A) or under the Securities Purchase Agreement or the Registration
Rights Agreement and such breach continues uncured for ten (10) business days
after the Corporation has been notified thereof in writing by the holder;
(vii) any representation or warranty of the Corporation made
herein or in any agreement, statement or certificate given in writing pursuant
hereto or in connection herewith (including, without limitation, the Securities
Purchase Agreement and the Registration Rights Agreement), shall be false or
misleading in any material respect when made and the breach of which would have
a Material Adverse Effect (as defined in the Securities Purchase Agreement);
(viii) the Corporation or any subsidiary of the Corporation
(other than Technology Development Systems, Inc.) shall make an assignment for
the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed; or
(ix) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted
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by or against the Corporation or any subsidiary of the Corporation (other than
Technology Development Systems, Inc.);
then, upon the occurrence and during the continuation of any Event of Default
specified in subparagraphs (i)-(vii) of this Paragraph A, at the option of
Holder exercisable through the delivery of a Default Notice (as defined in
Paragraph C below), and upon the occurrence of an Event of Default specified in
subparagraphs (viii) or (ix) of this Paragraph A, the Corporation shall pay
Holder, in satisfaction of its obligation to issue shares of Common Stock upon
exercise of this Warrant, an amount equal to the Default Amount and such Default
Amount, together with all other ancillary amounts payable hereunder, shall
immediately become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses of collection, and Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity; provided, however, that if the Corporation pays the Default Amount to
Holder within five (5) business days after the Corporation's receipt of a
Default Notice from Holder delivered as a result of the occurrence of an Event
of Default specified in subparagraph (v)(b) of this Paragraph A, Holder shall
have no other rights or remedies, at law or in equity, with respect to such
Event of Default. For the avoidance of doubt, the occurrence of any event
described in clauses (i), (ii), (iv), (v), (vii), (viii) or (ix) above shall
immediately constitute an Event of Default and there shall be no cure period.
B. Definition of Default Amount. The "Default Amount" with respect to
this Warrant means an amount equal to the greater of:
(i) A X M
-----------------------
EP
and
(ii) The sum of (x) the product of (I) one hundred percent (100%)
divided by the Exercise Percentage, times (II) the outstanding Prepaid Amount
hereof on the date on which the Corporation receives the Default Notices plus
all accrued and unpaid Premium thereon through the date of payment of the
Default Amount, plus (y) all unpaid Exercise Default Payments owing (if any)
with respect thereto through the date of payment of the Default Amount.
where:
"A" means the outstanding Prepaid Amount of this Warrant on the date on
which the Corporation receives the Default Notice plus all unpaid Exercise
Default Payments owing (if any) and any accrued and unpaid Premium with respect
thereto through the date of payment of the Default Amount;
"EP" means the Exercise Price in effect on the date on which the
Corporation receives the Default Notice; and
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"M" means (i) with respect to all Events of Default other than an Event
of Default specified in Article VI.A(v) hereof, the highest Closing Bid Price of
the Corporation's Common Stock during the period beginning on the date on which
the Corporation receives the Default Notice and ending on the date immediately
preceding the date of payment of the Default Amount and (ii) with respect to an
Event of Default specified in Article VI.A(v) hereof, the greater of (a) the
amount determined pursuant to clause (i) of this definition or (b) the fair
market value, as of the date on which the Corporation receives the Default
Notice, of the consideration payable to the holder of a share of Common Stock
pursuant to the transaction which triggers the Event of Default. For purposes of
this definition, "fair market value" shall be determined by an investment
banking firm selected by the Corporation and reasonably acceptable to the
Majority Holders, with the costs of such appraisal to be borne by the
Corporation.
C. Failure to Pay Default Amount. If the Corporation fails to pay the
Default Amount within five (5) business days of its receipt of a notice
requiring such payment (a "Default Notice"), then the Holder (i) shall be
entitled to interest on the Default Amount at a per annum rate equal to the
lower of twenty-four percent (24%) and the highest interest rate permitted by
applicable law from the date on which the Corporation receives the Default
Notice until the date of payment of the Default Amount hereunder, and (ii) shall
have the right, at any time and from time to time, to require the Corporation,
upon written notice, to immediately convert (in accordance with the terms of
Paragraph A of Article II) all or any portion of the Default Amount, plus
interest as aforesaid, into shares of Common Stock at the lowest Exercise Price
in effect during the period beginning on the date on which the Corporation
receives the Default Notice and ending on the Exercise Date with respect to the
conversion of such Default Amount. In the event the Corporation is not able to
pay all amounts due and payable with respect to all Prepaid Warrants subject to
Default Notices, the Corporation shall pay the Holders of such Prepaid Warrants
which are the subject of Default Notices such amounts pro rata, based on the
total amounts payable to each such Holder relative to the total amounts payable
to all such Holders.
ARTICLE VII
ADJUSTMENTS TO THE EXERCISE PRICE
The Exercise Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, combination, reclassification or other similar
event, the Fixed Exercise Price shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination or reclassification of shares, or other similar event, the
Fixed Exercise Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
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B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Closing Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (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
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Corporation
and other than a merger in which the Corporation is the surviving or continuing
entity and its authorized capital stock is unchanged), (iii) any sale or
transfer of all or substantially all of the assets of the Corporation or (iv)
any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into other securities or property (each of (i) - (iv) above
being a "Corporate Change"), then the Holders shall thereafter have the right to
receive upon exercise hereof, in lieu of the shares of Common Stock otherwise
issuable, such shares of stock, securities and/or other property as would have
been issued or payable in such Corporate Change with respect to or in exchange
for the number of shares of Common Stock which would have been issuable upon
exercise hereof (without giving effect to the limitations contained in Article
II.C.) had such Corporate Change not taken place, and in any such case,
appropriate provisions shall be made with respect to the rights and interests of
Holder to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Exercise Price and of the number of shares of
Common Stock issuable upon exercise of this Warrant) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the exercise thereof. The Corporation
shall not effect any Corporate Change unless (i) Holder has received written
notice of such transaction at least seventy-five (75) days prior thereto, but in
no event later than twenty (20) days prior to the record date for the
determination of stockholders entitled to vote with respect thereto, and (ii)
the resulting successor or acquiring entity (if not the Corporation) assumes by
written instrument the obligations of the Corporation under this Warrant. The
above provisions shall apply regardless of whether or not there would have been
a sufficient number of shares of Common Stock authorized and available for
issuance upon exercise of the Prepaid Warrants outstanding as of the date of
such transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
C. Adjustment Due to Major Announcement. In the event the Corporation
at any time after the Closing Date (i) makes a public announcement that it
intends to consolidate or merge with any other entity (other than a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Corporation and other than a merger in which the
Corporation is the surviving or continuing entity and its capital stock is
unchanged) or to sell or transfer all or substantially all of the assets of the
Corporation or (ii) any person, group or entity (including the Corporation)
publicly announces a tender offer, exchange offer or another transaction to
purchase 50% or more of the Corporation's Common Stock or otherwise publicly
announces an intention to replace a majority of the Corporation's Board of
Directors by waging a proxy battle or otherwise (the date of the announcement
referred to in clause (i) or (ii) of this Paragraph C is hereinafter referred to
as the "Announcement Date"), then the Exercise Price shall, effective upon the
Announcement Date and continuing through the sixth (6th) trading day following
the earlier of the consummation of the proposed transaction or tender offer,
exchange offer or another transaction or the
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Abandonment Date (as defined below), be equal to the lower of (x) the Exercise
Price which would have been applicable for an exercise occurring on the
Announcement Date and (y) the Exercise Price determined in accordance with
Article I.E. on the Exercise Date set forth in the applicable Notice of
Exercise. From and after the sixth (6th) trading day following the Abandonment
Date, the Exercise Price shall be determined as set forth in Article I.E.
"Abandonment Date" means with respect to any proposed transaction or tender
offer, exchange offer or another transaction for which a public announcement as
contemplated by this Paragraph C has been made, the date upon which the
Corporation (in the case of clause (i) above) or the person, group or entity (in
the case of clause (ii) above) publicly announces the termination or abandonment
of the proposed transaction or tender offer, exchange offer or another
transaction which caused this Paragraph C to become operative.
D. Adjustment Due to Distribution. If, at any time after the Closing
Date, the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"Distribution"), then Holder shall be entitled, upon any exercise of this
Warrant after the date of record for determining stockholders entitled to such
Distribution, to receive the amount of such assets which would have been payable
to Holder with respect to the shares of Common Stock issuable upon such exercise
(without giving effect to the limitations contained in Article II.C.) had Holder
been the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to such Distribution.
E. Issuance of Other Securities With Variable Conversion Price. If, at
any time after the Closing Date, the Corporation shall issue any securities
which are convertible into or exchangeable for Common Stock ("Convertible
Securities") at a conversion or exchange rate based on a discount to the market
price of the Common Stock at the time of conversion or exercise, then the
Exercise Percentage in respect of any exercise of any portion of this Warrant
after such issuance shall be the greater of (i) the greatest discount applicable
to any such Convertible Securities and (ii) the Exercise Percentage then in
effect.
F. Purchase Rights. If, at any time after the Closing Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which Holder could have acquired if Holder had held the number
of shares of Common Stock acquirable upon complete exercise of this Warrant
(without giving effect to the limitations contained in Article II.C.)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
G. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exercise Price pursuant to this Article VII, the
Corporation, at its expense, shall promptly
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compute such adjustment or readjustment and prepare and furnish to Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of Holder, furnish to Holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the Exercise
Price at the time in effect and (iii) the number of shares of Common Stock and
the amount, if any, of other securities or property which at the time would be
received upon exercise of this Warrant.
ARTICLE VIII
REDEMPTION
A. The Corporation shall have the right, at any time and from time to
time and provided the Corporation is not in material violation of any of its
obligations under this Prepaid Warrant, the Securities Purchase Agreement or the
Registration Rights Agreement and so long as no Event of Default shall have
occurred and be continuing (and the Holder doesn't waive such violation or Event
of Default), to redeem (an "Optional Redemption") all or any portion of the then
outstanding Prepaid Amount, excluding any Prepaid Amount subject to a Notice of
Conversion delivered to the Corporation prior to the date of the Optional
Redemption Notice (as defined below)) for cash, at an amount per share equal to
the Optional Redemption Amount (as defined below), by delivering an Optional
Redemption Notice to the holders of Prepaid Warrants. Except as provided herein,
holders of Prepaid Warrants may not convert all or any part of the Prepaid
Amount selected for redemption hereunder into Common Stock at any time prior to
the Effective Date of Redemption. For purposes hereof, the "Optional Redemption
Amount" means:
(a) With respect to an Optional Redemption for which the Effective
Date of Redemption (as defined below) occurs on or before the three hundred
sixty-fifth (365th) day following the Issuance Date, an amount equal to the sum
of (x) the Prepaid Amount being redeemed, plus (y) the accrued Premium thereon
and all unpaid Default Payments owing (if any) with respect thereto through the
Effective Date of Redemption.
(b) With respect to an Optional Redemption for which the Effective
Date of Redemption occurs after the three hundred sixty-fifth (365th) day
following the Issuance Date:
V x M
-----------
EP
where:
"V" means the Prepaid Amount being redeemed plus the accrued Premium
thereon and all unpaid Default Payments owing (if any) with respect thereto
through the Effective Date of Redemption;
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"EP" means the Exercise Price in effect on the date of the Optional
Redemption Notice; and
"M" means the Closing Bid Price of the Corporation's Common Stock on
the date of the Optional Redemption Notice.
The Corporation may not deliver an Optional Redemption Notice to the
holders of Prepaid Warrants unless on or prior to the date of delivery of such
Optional Redemption Notice, the Corporation shall have deposited with an escrow
agent reasonably acceptable to holders of a majority of the then Prepaid
Warrants, as a trust fund, cash sufficient in amount to pay all amounts to which
the holders of Prepaid Warrants are entitled upon such redemption pursuant to
this Paragraph A, with irrevocable instructions and authority to such escrow
agent to complete the redemption thereof in accordance with this Paragraph A.
Any Optional Redemption Notice delivered in accordance with the immediately
preceding sentence shall be accompanied by a statement executed by a duly
authorized officer of its escrow agent, certifying the amount of funds which
have been deposited with such escrow agent and that the escrow agent has been
instructed and agrees to act as redemption agent hereunder.
The Corporation shall effect an Optional Redemption under this Section
VIII.A by giving prior written notice (the "Optional Redemption Notice") of the
date on which such redemption is to become effective (the "Effective Date of
Redemption"), the Prepaid Amount subject to such Optional Redemption and the
Optional Redemption Amount to (i) the holders of Prepaid Warrants at the address
and facsimile number of each holder appearing in the Corporation's register and
(ii) the transfer agent for the Common Stock, which Optional Redemption Notice
shall be deemed to have been delivered on the business day after the
Corporation's fax (with a copy sent by overnight courier to the holders of
Prepaid Warrants) of such notice to the holders of Prepaid Warrants. To be
effective, an Optional Redemption Notice must be so delivered not less than
three (3) business days prior to the Effective Date of Redemption specified in
such notice.
B. (a) The Optional Redemption Amount shall be paid to the holders of
Prepaid Warrants being redeemed within three (3) business days of the Effective
Date of Redemption; provided, however, that the Corporation shall not be
obligated to deliver any portion of the Optional Redemption Amount until either
the certificates evidencing the Prepaid Warrants being redeemed are delivered to
the office of the Corporation or the escrow agent or the holder notifies the
Corporation or the escrow agent that such certificates have been lost, stolen or
destroyed and delivers the documentation in accordance with Article IX.G hereof.
Notwithstanding anything herein to the contrary, in the event that the
certificates evidencing the Prepaid Warrants being redeemed are not delivered to
the Corporation or the escrow agent prior to the third business day following
the Effective Date of Redemption, the redemption of the Prepaid Warrants
pursuant to this Article VIII shall still be deemed effective as of the
Effective Date of Redemption and the Optional Redemption Amount shall be paid to
the holder of Prepaid Warrants being redeemed within five (5) business days of
the date the certificates evidencing the Prepaid Warrants being redeemed are
actually delivered to the Corporation or the escrow agent.
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(b) In the event that any Optional Redemption Notice delivered by
the Corporation pursuant to this Article VIII relates to less than all of the
Prepaid Warrants then outstanding, the Corporation shall redeem Prepaid Warrants
from each holder pro rata, based on the total Prepaid Amount outstanding on the
Effective Date of Redemption held by each holder of Prepaid Warrants relative to
the total number of shares of Prepaid Warrants outstanding on the Effective Date
of Redemption held by all holders of Prepaid Warrants.
(c) If the Corporation fails to pay, when due and owing, any
Optional Redemption Amount, then the holder of Prepaid Warrants entitled to
receive such Optional Redemption Amount shall have the right, at any time and
from time to time during the twenty (20) trading day period following the
Effective Date of Redemption (the "Optional Redemption Amount Period"), to
require the Corporation, upon written notice, to immediately exercise (in
accordance with the terms of paragraph A of Article IV) any or all of the
Prepaid Amount which is the subject of such redemption, into shares of Common
Stock at the lowest Exercise Price in effect during the period beginning on the
date the Corporation elected to redeem such Prepaid Warrants and ending on
expiration of the Optional Redemption Amount Exercise Period. From and after the
expiration of the Optional Redemption Amount Exercise Period, the holders may
convert Prepaid Warrants at the Exercise Price then in effect and in accordance
with Article IV.
ARTICLE IX
MISCELLANEOUS
A. Failure or Indulgency Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
B. Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier and shall be
deemed to have been given upon receipt (which shall include telephone line
facsimile transmission). The addresses for such communications shall be:
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If to the Company:
The Netplex Group, Inc.
0000 Xxxxxxxxxx Xxxxx
XxXxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxx Xxxxx, President and CEO
with a copy simultaneously transmitted by like means to:
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Xx.
If to the Holder, at such address as such Holder shall have provided in
writing to the Corporation.
C. Amendment Provision. Except as otherwise provided herein, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Corporation and the Majority Holders. The term "Warrant" and all
references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
D. Assignability. This Warrant shall be binding upon the Corporation
and its successors and assigns and shall inure to the benefit of the Holder and
its successors and assigns.
E. Governing Law. 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 in the State of New York. The Corporation irrevocably
consents to the jurisdiction of the United States federal courts and state
courts located in the City of New York in the State of New York in any suit or
proceeding based on or arising under this Warrant and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. The Corporation irrevocably waives the defense of an inconvenient forum
to the maintenance of such suit or proceeding. The Corporation further agrees
that service of process upon the Corporation mailed by first class mail shall be
deemed in every respect effective service of process upon the Corporation in any
such suit or proceeding. Nothing herein shall affect Holder's right to serve
process in any other manner permitted by law. The Corporation agrees that a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.
-20-
F. Denominations. At the request of Holder, upon surrender of this
Warrant, the Corporation shall promptly issue new Warrants in the aggregate
outstanding Prepaid Amount hereof, in the form hereof, in such denominations as
Holder shall request.
G. Lost or Stolen Warrants. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of this Warrant and (ii)
(y) in the case of loss, theft or destruction, of indemnity and affidavit
reasonably satisfactory to the Corporation, or (z) in the case of mutilation,
upon surrender and cancellation of this Warrant, the Corporation shall execute
and deliver new Warrants, in the form hereof, in such denominations as Holder
may request. However, the Corporation shall not be obligated to reissue such
lost or stolen Warrants if Holder contemporaneously requests the Corporation to
exercise this Warrant.
H. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the Holders of Prepaid
Warrants based on the aggregate Prepaid Amount of the Prepaid Warrants issued to
each Holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the Holders of Prepaid Warrants based on the aggregate
Prepaid Amount of the Prepaid Warrants held by each Holder at the time of the
increase in the Cap Amount or Reserved Amount. In the event a Holder shall sell
or otherwise transfer any of such Holder's Prepaid Warrants, each transferee
shall be allocated a pro rata portion of such transferor's Cap Amount and
Reserved Amount. Any portion of the Cap Amount or Reserved Amount which remains
allocated to any person or entity which does not hold any Prepaid Warrants shall
be allocated to the remaining Holders of Prepaid Warrants pro rata based on the
aggregate Prepaid Amount of the Prepaid Warrants then held by such Holders.
I. Quarterly Statements of Available Shares. The Corporation shall
deliver (or cause its transfer agent to deliver) to Holder a written report
notifying Holder of any occurrence which prohibits the Corporation from issuing
Common Stock upon any exercise of Prepaid Warrants. The Corporation (or its
transfer agent) shall also provide, within fifteen (15) days after delivery to
the Corporation of a written request by any Holder, any of the following
information as of the date of such request: (i) the total outstanding Prepaid
Amount of all Prepaid Warrants, (ii) the total number of shares of Common Stock
issued upon all exercises of all Prepaid Warrants prior to such date, (iii) the
total number of shares of Common Stock which are reserved for issuance upon
exercise of the Prepaid Warrants which are then outstanding, and (iv) the total
number of shares of Common Stock which may thereafter be issued by the
Corporation upon exercise of the Prepaid Warrants before the Corporation would
exceed the Reserved Amount and the Cap Amount.
J. Payment of Cash; Defaults. Whenever the Corporation is required to
make any cash payment to Holder under this Warrant (as an Exercise Default
Payment or otherwise), such cash payment shall be made to Holder within five (5)
business days after delivery by Holder of a notice specifying that Holder elects
to receive such payment in cash and the method (e.g., by check, wire transfer)
in which such payment should be made. If such payment is not delivered within
such five (5) business day period, Holder shall thereafter be entitled to
interest on the unpaid amount at a per
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annum rate equal to the lower of twenty-four percent (24%) and the highest
interest rate permitted by applicable law until such amount is paid in full to
Holder.
K. Restrictions on Shares. The shares of Common Stock issuable upon
exercise of this Warrant may not be sold or transferred unless (i) they first
shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope customary for opinions in such
circumstances) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold under
Rule 144 under the Act. Except as otherwise provided in the Securities Purchase
Agreement, each certificate for shares of Common Stock issuable upon exercise of
this Warrant that have not been so registered and that have not been sold under
an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon exercise of this Warrant, the Corporation shall remove the
foregoing legend from the certificate and issue to such holder a new certificate
therefor free of any transfer legend, if (i) with such request, the Corporation
shall have received either (A) an opinion of counsel, in form, substance and
scope customary for opinions in such circumstances, to the effect that any such
legend may be removed from such certificate, or (B) satisfactory representations
from Holder that Holder is eligible to sell such security under Rule 144 or (ii)
a registration statement under the Securities Act covering the resale of such
securities is in effect. Nothing in this Warrant shall (i) limit the
Corporation's obligation under the Registration Rights Agreement, or (ii) affect
in any way Holder's obligations to comply with applicable securities laws upon
the resale of the securities referred to herein.
L. Status as Warrantholder. Upon submission of a Notice of Exercise by
Holder, the Prepaid Amount of this Warrant (other than any portion of this
Warrant, if any, which cannot be exercised because the exercise thereof would
exceed Holder's allocated portion of the Reserved Amount or Cap Amount) shall be
deemed exercised for shares of Common Stock as of the Exercise Date and Holder's
rights as a holder of this Warrant shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to Holder
because of a failure by the Corporation to comply with the terms of this
Warrant.
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Notwithstanding the foregoing, if Holder has not received certificates for all
shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Delivery Period with respect to an exercise for any reason,
then (unless Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Corporation) the portion of the Prepaid Amount subject
to such exercise shall be deemed outstanding under this Warrant and the
Corporation shall, as soon as practicable, return this Warrant to Holder. In all
cases, Holder shall retain all of its rights and remedies (including, without
limitation, (i) the right to receive Exercise Default Payments pursuant to
Article IV.A to the extent required thereby for such Exercise Default and any
subsequent Exercise Default and (ii) the right to have the Exercise Price with
respect to subsequent exercises determined in accordance with Article IV.B) for
the Corporation's failure to honor the exercise of this Warrant.
M. Remedies Cumulative. The remedies provided in this Warrant shall be
cumulative and in addition to all other remedies available under this Warrant,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance giving rise to such remedy and nothing herein shall limit Holder's
right to pursue actual damages for any failure by the Corporation to comply with
the terms of this Warrant. The Corporation acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, the Holder shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
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IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
signed by its duly authorized officer.
THE NETPLEX GROUP, INC.
By:_____________________________________
Name:
Title:
Exhibit 1
NOTICE OF EXERCISE
To: The Netplex Group, Inc.
0000 Xxxxxxxxxx Xxxxx
XxXxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxx Xxxxx, President and CEO
The undersigned hereby irrevocably elects to exercise $____________ of the
Prepaid Amount of this Warrant (the "Exercise") into shares of common stock
("Common Stock") of The Netplex Group, Inc. (the "Corporation") according to the
conditions of the Prepaid Common Stock Purchase Warrant dated September __, 1998
(the "Warrant"), as of the date written below. If securities are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
holder for any Exercise, except for transfer taxes, if any. A copy of the
Warrant is attached hereto (or evidence of loss, theft or destruction thereof).
If the Corporation's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Corporation
shall electronically transmit the Common Stock issuable pursuant to this Notice
of Exercise to the account of the undersigned or its nominee (which is
________________) with DTC through its Deposit Withdrawal Agent Commission
System ("DTC Transfer"). If the Corporation's transfer agent does not
participate in the DTC program as aforementioned, or if Holder checks the box
set forth below, the Corporation shall deliver to Holder physical certificates
representing the Common Stock issuable upon exercise of the Warrant.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon exercise of this
Warrant shall be made pursuant to registration of the Common Stock under the
Securities Act or pursuant to an exemption from registration under the Act.
In the event of partial exercise, please reissue an appropriate Warrant(s) for
the portion of the Prepaid Amount which shall not have been exercised.
Check Box if Applicable:
/ / In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Exercise by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned
physical certificates representing such shares of Common Stock.
Date of Exercise:
Applicable Exercise Price:
Portion of Prepaid Amount to be exercised:
Amount of Exercise Default
Payments to be exercised, if any:
Number of Shares of
Common Stock to be Issued:
Signature:_______________________________________
Name:____________________________________________
Address:_________________________________________
