EXHIBIT B
to Securities
Purchase
Agreement
VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON THE
FIFTH ANNIVERSARY OF ISSUANCE
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT 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 OR ANY OTHER JURISDICTION. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase _________ Shares of
Common Stock, par value $.001 per share
Date: July 25, 2000
LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, ________________________,
or its registered assigns, is entitled to purchase from LUMENON INNOVATIVE
LIGHTWAVE TECHNOLOGY, INC., a corporation organized under the laws of the State
of Delaware (the "Company"), at any time or from time to time during the period
specified in Section 2 hereof, ________________________ (_________) fully paid
and nonassessable shares of the Company's common stock, par value $.001 per
share (the "Common Stock"), at an exercise price per share (the "Exercise
Price") calculated as follows: in the event the Volume Weighted Average Price
(as defined below) for the Common Stock for the five consecutive trading days
immediately preceding the Vesting Date (as defined in Section 2 below) is less
than or equal to $30.00 (subject to equitable adjustments for stock splits,
stock dividends, recapitalization and similar events prior to the Vesting Date
(collectively, "Equitable Adjustments")), then the initial Exercise Price shall
be $10.00 (subject to Equitable Adjustments); and in the event the Volume
Weighted Average Price for the Common Stock for the five consecutive trading
days immediately preceding the Vesting Date exceeds $30.00 (subject to Equitable
Adjustments), but is less than $70.00 (subject to Equitable Adjustments), then
the initial Exercise Price shall be equal to the sum of (i) $10.00 (subject to
Equitable Adjustments) and (ii) the
product of (A) the amount by which the Volume Weighted Average Price for the
Common Stock for the five consecutive trading days immediately preceding the
Vesting Date exceeds $30.00 (subject to Equitable Adjustments) and (B) 0.5; and
in the event that the Volume Weighted Average Price for the Common Stock for the
five consecutive trading days immediately preceding the Vesting Date exceeds
$70.00 (subject to Equitable Adjustments), the initial Exercise Price shall be
$30.00 (subject to Equitable Adjustments); provided, however, in no event shall
the initial Exercise Price exceed the consideration per share (which shall be
determined in accordance with the provisions of Section 4(b) hereof) for which
the Company shall issue shares of Common Stock in connection with the Company's
then most recent equity financing of at least $5,000,000 (other than a firm
commitment underwritten public offering of securities registered under the
Securities Act of 1933). The number of shares of Common Stock purchasable
hereunder (the "Warrant Shares") and the Exercise Price are subject to
adjustment as provided in Section 4 hereof. The term "Volume Weighted Average
Price" means the Volume Weighted Average Price for any security as of any date
as reported by Bloomberg Financial Markets (or a comparable reporting service of
national reputation selected by the Corporation and reasonably acceptable to the
Purchasers (as defined in that certain Securities Purchase Agreement, dated as
of July 25, 2000, by and among the Company and the other signatory thereto (the
"Securities Purchase Agreement")) holding a majority of the Warrant Shares
(assuming full exercise of all of the Warrants (as defined below) without regard
to any limitations on exercise contained herein or in the Securities Purchase
Agreement) ("Majority Holders") if Bloomberg Financial Markets is not then
reporting Volume Weighted Average 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 all 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
Volume Weighted Average Price cannot be calculated for such security as of
either of such dates on any of the foregoing bases, the Volume Weighted Average
Price of such security on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the Majority Holders, with the costs of such appraisal to be borne
by the Company. The term "Warrants" means this Warrant and the other warrants of
the Company issued pursuant to this Securities Purchase Agreement. All
references herein to monetary denominations shall refer to lawful money of the
United States of America.
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company by 11:59 p.m. New York time on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof) and upon (i) payment
to the Company in cash, by certified or
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official bank check or by wire transfer for the account of the Company, of the
Exercise Price for the Warrant Shares specified in the Exercise Agreement or
(ii) if the holder is permitted to effect a Cashless Exercise (as defined in
Section 12(c) below) pursuant to Section 12(c) hereof, delivery to the Company
of a written notice of an election to effect a Cashless Exercise for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered and the completed Exercise
Agreement shall have been delivered and payment shall have been made for such
shares as set forth above or, if such day is not a business day, on the next
succeeding business day. The Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two
business days, after this Warrant shall have been so exercised (the "Delivery
Period"). If the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as
the certificates therefor do not bear a legend and the holder is not obligated
to return such certificate for the placement of a legend thereon, the Company
shall cause its transfer agent to electronically transmit the Warrant Shares so
purchased to the holder by crediting the account of the 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 Company shall deliver to the holder physical certificates
representing the Warrant Shares so purchased. Further, the holder may instruct
the Company to deliver to the holder physical certificates representing the
Warrant Shares so purchased in lieu of delivering such shares by way of DTC
Transfer. Any certificates so delivered shall be in such denominations as may be
requested by the holder hereof, shall be registered in the name of such holder
or such other name as shall be designated by such holder and, following the date
on which the Warrant Shares have been registered under the Securities Act
pursuant to that certain Registration Rights Agreement, dated as of July 25,
2000, by and between the Company and the other signatory thereto (the
"Registration Rights Agreement") or otherwise may be sold by the holder pursuant
to Rule 144 promulgated under the Securities Act (or a successor rule), shall
not bear any restrictive legend. If this Warrant shall have been exercised only
in part, then the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement, and the Company fails
for any reason to deliver, on or prior to the fifth business day following the
expiration of the Delivery Period for such exercise, the number of shares of
Common Stock to which the holder is entitled upon such exercise (an "Exercise
Default"), then the Company shall pay to the holder payments ("Exercise Default
Payments") for an Exercise Default in the amount of (a) (N/365), multiplied by
(b) the amount by which the Market Price (as defined in Section 4(l) below) on
the date the Exercise Agreement giving rise to the Exercise Default is
transmitted in accordance with this Section 1 (the "Exercise Default Date")
exceeds the Exercise Price in respect of such Warrant Shares, multiplied by (c)
the number of shares of Common Stock the Company failed to so deliver in such
Exercise Default, multiplied by (d) .24, where N =
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the number of days from the Exercise Default Date to the date that the Company
effects the full exercise of this Warrant which gave rise to the Exercise
Default. The accrued Exercise Default Payment for each calendar month shall be
paid in cash not later than the fifth day of the month following the month in
which it has accrued.
Nothing herein shall limit the holder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock as required pursuant to the terms of Section 3(b) hereof
or to otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
2. Period of Exercise. This Warrant is immediately exercisable, at
any time or from time to time on or after January 25, 2002 of this Warrant (as
such date may be accelerated pursuant to the Notes and the Registration Rights
Agreement, the "Vesting Date") and before 5:00 p.m., New York City time, on July
25, 2005 (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise in full of this Warrant (without giving effect
to the limitations on exercise set forth in Section 7(g) hereof).
(c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or
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performance of any of the terms to be observed or performed by it hereunder, but
will at all times in good faith assist in the carrying out of all the provisions
of this Warrant and in the taking of all such action as may reasonably be
requested by the holder of this Warrant in order to protect the economic benefit
inuring to the holder hereof and the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the lowest Exercise Price
then in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (a) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(f), (b) subject itself to general
taxation in any such jurisdiction, (c) file a general consent to service of
process in any such jurisdiction, (d) provide any undertakings that cause the
Company undue expense or burden, or (e) make any change in its charter or
bylaws, which in each case the Board of Directors of the Company determines to
be contrary to the best interests of the Company and its stockholders.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price(s) as
required herein results in a fraction of a cent, such Exercise Price(s) shall be
rounded up or down to the nearest cent.
(a) Adjustment of Exercise Price(s). Except as otherwise provided
in Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price on the Measurement Date (as
such terms are hereinafter defined) (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price(s) will be adjusted
in accordance with the following formula:
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E' = E x O + P/M
-------------
CSDO
where:
E' = the adjusted Exercise Price;
E = the Exercise Price on the Measurement Date;
M = the Market Price on the Measurement Date;
O = the number of shares of Common
Stock outstanding immediately prior to the
Dilutive Issuance;
P = the aggregate consideration,
calculated as set forth in Section 4(b)
hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of
Common Stock Deemed Outstanding (as defined
in Section 4(l)(i) below) immediately after
the Dilutive Issuance.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 4(a) if such adjustment would result in an increase in the Exercise
Price.
(b) Effect on Exercise Price(s) of Certain Events. For purposes
of determining the adjusted Exercise Price(s) under Section 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "Options") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price in effect on the Measurement Date ("Below
Market Options"), then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options, be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon the exercise of such Below Market Options"
is determined by dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the issuance or granting of all such Below
Market Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Market
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof at the
time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise
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Price(s) will be made upon the actual issuance of such Common Stock upon the
exercise of such Below Market Options or upon the exercise, conversion or
exchange of Convertible Securities issuable upon exercise of such Below Market
Options. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Below Market Options or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise such option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in effect
will be readjusted to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Below Market Options or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Market Price in effect on the Measurement Date, then the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon such
exercise, conversion or exchange" is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
issuance or sale of all such Convertible Securities (taking into account the
value of any warrants or other securities issued to the purchasers of such
Convertible Securities), plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange thereof at the time such Convertible Securities first become
exercisable, convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities. No further adjustment to the Exercise Price(s) will
be made upon the actual issuance of such Common Stock upon exercise, conversion
or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Market Price on the
Measurement Date was 75% of the Market Price on such date (the "Assumed Variable
Market Price"). Further, if the Market Price at any time or times thereafter is
less than or equal to the Assumed Variable Market Price last used for making any
adjustment under this Section 4 with respect to any Variable Rate Convertible
Security, the Exercise
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Price(s) in effect at such time shall be readjusted to equal the Exercise
Price(s) which would have resulted if the Assumed Variable Market Price at the
time of issuance of the Variable Rate Convertible Security had been 75% of the
Market Price existing at the time of the adjustment required by this sentence.
(iii) Change in Option Price or Conversion Rate. If there is
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed to protect
against dilution), the Exercise Price(s) in effect at the time of such change
will be readjusted to the Exercise Price(s) which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold.
(iv) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, including, in
the case of a strategic or similar arrangement in which the other entity will
provide services to the Company, purchase services from the Company or otherwise
provide intangible consideration to the Company, the amount of the consideration
other than cash received by the Company (including the net present value of the
contribution expected by the Company for the provided or purchased services)
will be the fair market value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities are issued
in connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The Company shall calculate, using
standard commercial valuation methods appropriate for valuing such assets, the
fair market value of any consideration other than cash or securities; provided,
however, that if the holder hereof does not agree to such fair market value
calculation within three business days after receipt thereof from the Company,
then such fair market value will be determined in good faith by an investment
banker or other appropriate expert of national reputation selected by the
Company and reasonably acceptable to the holder hereof, with the costs of such
appraisal to be borne by the Company.
(v) Exceptions to Adjustment of Exercise Price(s). No
adjustment to the Exercise Price(s) will be made (i) upon the exercise of any
warrants, options or convertible securities
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issued and outstanding on July 25, 2000 and set forth on Schedule 3(d) of the
Securities Purchase Agreement in accordance with the terms of such securities as
of such date; (ii) upon the grant or exercise of any stock or options which may
hereafter be granted or exercised under any employee benefit plan of the Company
now existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose; (iii) upon the issuance of
any Notes or Warrants in accordance with the terms of the Securities Purchase
Agreement; or (iv) upon conversion of the Notes or exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the Company,
at any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price(s) in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company, at any time during the Exercise Period, combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price(s) in effect
immediately prior to such combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price(s) pursuant to the provisions of Section 4(c), the number of
shares of Common Stock issuable upon exercise of this Warrant at each such
Exercise Price shall be adjusted by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Common Stock issuable upon exercise of this Warrant at such Exercise Price
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation
of the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder of this Warrant such
shares of stock,
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securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire. Notwithstanding the foregoing, in the event of any
consolidation of the Company with, or merger of the Company into, any other
corporation, or the sale or conveyance of all or substantially all of the assets
of the Company, at any time during the Exercise Period, the holder of the
Warrant shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair value of this Warrant as
determined in accordance with customary valuation methodology used in the
investment banking industry.
(f) Distribution of Assets. In case the Company 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, stock repurchase, by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Exercise Period, then the holder of this Warrant shall be entitled upon exercise
of this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets (or rights) which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of shareholders
entitled to such Distribution. If the Company distributes rights, warrants,
options or any other form of convertible securities and the right to exercise or
convert such securities would expire in accordance with its terms prior to the
exercise of the Warrants, then the terms of such securities shall provide that
such exercise or convertibility right shall remain in effect until 30 days after
the date the holders of the Warrants receive such securities pursuant to the
exercise hereof.
(g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price(s), then, and in each such case,
the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price(s) resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at each such
price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Such calculation
shall be certified by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than $.01, but any such lesser
adjustment shall be carried forward and shall be made at the time and together
with the next subsequent adjustment which, together with any adjustments so
carried forward, shall amount to not less than $.01.
(i) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
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(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least 30 days prior to the record date or the date on which the Company's books
are closed in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above. Notwithstanding the foregoing, the Company
shall publicly disclose the substance of any notice delivered hereunder prior to
delivery of such notice to the holder of this Warrant.
(k) Certain Events. If, at any time during the Exercise Period,
any event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price(s)
and the number of shares of Common Stock acquirable upon exercise of this
Warrant at each such Exercise Price so that the rights of the holder shall be
neither enhanced nor diminished by such event.
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(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number
of shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the NASDAQ
National Market ("NASDAQ") by Bloomberg for the five consecutive trading days
immediately preceding such date, or (ii) if NASDAQ is not the principal trading
market for the shares of Common Stock, the average of the last reported bid
prices as reported by Bloomberg on the principal trading market for the Common
Stock during the same period, or, if there is no bid price for such period, the
last reported sales price as reported by Bloomberg for such period, or (iii) if
market value cannot be calculated as of such date on any of the foregoing bases,
the Market Price shall be the average fair market value as reasonably determined
by an investment banking firm selected by the Company and reasonably acceptable
to the holder, with the costs of the appraisal to be borne by the Company. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Section 4,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
(iv) "Measurement Date" means (i) for purposes of any private
offering of securities under Section 4(2) of the Securities Act of 1933, as
amended, the date that the Company enters into legally binding definitive
agreements for the issuance and sale of such securities and (ii) for purposes of
any other issuance of securities, the date of issuance thereof.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax
-12-
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and (g) hereof and to the provisions
of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Each transferee
of this Warrant or any portion hereof shall be bound by the selling restrictions
set forth in Section 4(k) of the Securities Purchase Agreement, which Section is
incorporated herein by reference. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Section 8
hereof are assignable only in accordance with the provisions of the Registration
Rights Agreement.
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares (at the Exercise Price therefor) as shall be
designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant
-13-
shall be promptly canceled by the Company. The Company shall pay all taxes
(other than securities transfer taxes) and all other expenses (other than legal
expenses, if any, incurredby the Holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 7. The Company shall indemnify and reimburse the holder of this
Warrant for all losses and damages arising as a result of or related to any
breach of the terms of this Warrant, including costs and expenses (including
reasonable legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.
(e) Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to
the Company and (iii) that the transferee be an "accredited investor" as defined
in Rule 501(a) promulgated under the Securities Act; provided that no such
opinion, letter, or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer. In no event
shall the holder of this Warrant have the right to exercise any portion of this
Warrant for shares of Common Stock or to dispose of any portion of this Warrant
to the extent that such right to effect such exercise or disposition would
result in the holder or any of its affiliates beneficially owning more than
4.99% of the outstanding shares of Common Stock. To the extent the holder of
this Warrant owns other securities with a limitation on conversion, exercise or
disposition analogous to the limitation set forth in this Section 7(g), the
limitations on conversion, exercise and disposition of this Warrant and such
securities shall be applied collectively to all such securities so that the
holder of this Warrant may select the order in which it wishes to convert,
exercise or dispose of such securities and the holder of this Warrant will only
have the right to effect conversions, exercises and dispositions of all such
securities to the extent that such conversions, exercises and dispositions do
not result in the holder or any of its affiliates beneficially owning more than
4.99% of the outstanding shares of Common Stock. For purposes of this Section
7(g), beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
-14-
thereunder. The restriction contained in this Section 7(g) 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, the holder of this Warrant
and the Majority Holders shall approve, in writing, such alteration, amendment,
deletion or change.
8. Registration Rights. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement, including the right to assign such rights to certain
assignees, as set forth therein.
9. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Lumenon Innovative Lightwave Technology, Inc.
0000 Xxxxx-Xxxxxx Xxxxxxx
Xx. Xxxxxxx, Xxxxxx X0X 0X0
Xxxxxx
Attention: Xxxxxxx Xxxxxxxx
Telecopy: (000) 000-0000
with copies to:
De Grandpre Chaurette Xxxxxxxx
2000 Avenue XxXxxx College, Suite 1600
Montreal, Quebec X0X 0X0
Xxxxxx
Attention: Xxxxxx Xxxxxxx
Telecopy: (000)000-0000
and:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx &
Wolosky, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Telecopy: (000)000-0000
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.
-15-
10. Governing Law; Jurisdiction. This Warrant shall be governed by
and construed in accordance with the laws of the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware 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 Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company 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.
11. Miscellaneous.
(a) Amendments. Except as provided in Section 7(g) hereof, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, or if there is not reserved pursuant to Article IV.A of the
Notes a sufficient number of shares of Common Stock to permit full conversion of
the Notes and full exercise of the Warrants, this Warrant may be exercised at
any time during the Exercise Period by presentation and surrender of this
Warrant to the Company at its principal executive offices with a written notice
of the holder's intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder
shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the last reported sale price per share of the Common Stock on
the date of exercise (as reported on NASDAQ, or if not so reported, as reported
on the principle United States securities market on which the Common Stock is
then traded) and the Exercise Price, and the denominator of which shall be such
last reported sale price per share of Common Stock.
(d) Trading Day. For purposes of this Warrant, the term "trading
day" means any day on which NASDAQ or, if the Common Stock is not then traded on
NASDAQ, the principal
-17-
United States securities exchange or trading market where the Common Stock is
then listed or traded, is open for trading.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
-18-
IN WITNESS WHEREOF, the Company has caused this Stock Purchase
Warrant to be signed by its duly authorized officer.
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
By:
-----------------------------------
Name: S. Xxxx Xxxxxx
---------------------------------
Title: President
--------------------------------
-19-
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: Lumenon Innovative Lightwave Technology, Inc.
0000 Xxxxx-Xxxxxx Xxxxxxx
Xx. Xxxxxxx, Xxxxxx X0X 0X0
Xxxxxx
Attention: Xxxxxxx Xxxxxxxx
Telecopy: (000) 000-0000
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC., a corporation organized under the laws of the State of
Delaware (the "Company"), evidenced by the attached Warrant and [herewith makes
payment of the Exercise Price with respect to such shares in full] [hereby
elects to effect a Cashless Exercise (as defined in Section 11(c) of such
Warrant], all in accordance with the conditions and provisions of such Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
/ / The undersigned requests that the Company cause its
transfer agent to electronically transmit the Common
Stock issuable pursuant to this Exercise Agreement to
the account of the undersigned or its nominee (which is
_________________) with DTC through its Deposit
Withdrawal Agent Commission System ("DTC Transfer"),
provided that such transfer agent participates in the
DTC Fast Automated Securities Transfer program.
/ / In lieu of receiving the shares of Common Stock issuable
pursuant to this Exercise Agreement by way of DTC
Transfer, the undersigned hereby requests that the
Company cause its transfer agent to issue and deliver to
the undersigned physical certificates representing such
shares of Common Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
Dated:
-----------------------
--------------------------------
Signature of Holder
Name of Holder (Print)
Address:
--------------------------------
--------------------------------
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints
_____________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: _____________________, ____
In the presence of
__________________________________
Name:
------------------------------
Signature:
-------------------------
Title of Signing Officer or Agent
(if any):
Address:
---------------------------
---------------------------
---------------------------
Note: The above signature
should correspond exactly with the
name on the face of the within
Warrant.
