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EXHIBIT 10.5
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: MHL DEVELOPMENT COMPANY, an Oregon corporation
Number of Shares: 133,333
Class of Securities: Common Stock
Initial Exercise Price: .30 cents
Issue Date: January 5, 2001
Expiration Date: January 5, 2008 (Subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00
and for other good and valuable consideration, IMPERIAL BANK or its registered
assignee ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this warrant, subject to the provisions and upon the terms and conditions set
forth in this warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this warrant by
delivering this warrant and a duly executed Notice of Exercise in substantially
the form attached as Appendix 1 to the principal office of the Company. Unless
Holder is exercising the conversion right set forth in Section 1.2, Holder shall
also deliver to the Company a check for the aggregate Warrant Price for the
Shares being purchased.
1.2 Conversion Right. In lieu of exercising this warrant as
specified in Section 1.1, Holder may from time to time convert this warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Section 1.3.
1.3 Fair Market Value. If the Shares are traded regularly in a
public market, the fair market value of the Shares shall be the closing price of
the Shares (or the closing price of the Company's stock into which the Shares
are convertible) reported for the business day
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immediately before Holder delivers its Notice of Exercise to the Company. If the
Shares are not regularly traded in a public market, the Board of Directors of
the Company shall determine fair market value in its reasonable good faith
judgment.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this warrant has not been fully
exercised or converted and has not expired, a new warrant representing the
Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this warrant,
the Company at its expense shall execute and deliver, in lieu of this warrant, a
new warrant of like tenor.
1.6 Repurchase on Sale, Merger, or Consolidation of the Company.
1.6.1 "Acquisition." For the purpose of this warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets (including intellectual property) of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
1.6.2 Assumption of Warrant. If upon the closing of any
Acquisition the successor entity assumes the obligations of this warrant, then
this warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this warrant.
1.6.3 Nonassumption. If upon the closing of any Acquisition
the successor entity does not assume the obligations of this warrant and Holder
has not otherwise exercised this warrant in full, then this warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the Acquisition on the same terms as
other holders of the same class of securities of the Company.
1.7 Stock Transfer Restriction Agreement. The Holder agrees that any
of the Shares acquired upon exercise of this warrant shall be subject to the
Stock Transfer Restriction Agreement in the form attached as Exhibit B.
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ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this warrant, Holder shall be entitled to receive, upon exercise
or conversion of this warrant, the number and kind of securities and property
that Holder would have received for the Shares if this warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
warrant for such new securities or other property. The new warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased, and the number
of such Shares exercisable hereunder shall be proportionately decreased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this warrant shall be subject to
adjustment, from time to time, in the manner set forth on Exhibit A, if
attached, in the event of Diluting Issuances (as defined in Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this warrant by the Company, but
shall at all times in good faith assist in carrying out all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment.
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2.6 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. RERESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the
purchase right represented by this warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for (i) restrictions on transfer provided for herein or under applicable
federal and state securities laws and (ii) liens and encumbrances created by the
Holder.
(b) The Company's capitalization table attached to this
warrant is true and complete as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; or (d) to merge or consolidate with or into any other corporation, or
sell, lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up, then, in connection with each such event, the
Company shall give Holder (1) at least 20 days prior written notice of the date
on which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (a) and (b) above; and (2) in the case of the matters
referred to in (c) and (d) above at least 20 days prior written notice of the
date when the same will take place (and specifying the date on which the holders
of common stock will be entitled to exchange their common stock for securities
or other property deliverable upon the occurrence of such event).
3.3 Information Rights. So long as the Holder holds this warrant
and/or any of the Shares, and the Company does not have a class of securities
registered under the Securities Exchange Act of 1934, the Company shall deliver
to the Holder (a) promptly after mailing, copies of all communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
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Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
ARTICLE 4. MISCELLANEOUS.
4.1 Term. This warrant is exercisable in whole or in part, at any
time and from time to time on or before the Expiration Date set forth above;
provided, however, that if the Company completes its initial public offering
within the three-year period immediately prior to the Expiration Date, the
Expiration Date shall automatically be extended until the third anniversary of
the effective date of the Company's initial public offering. If this warrant has
not been exercised prior to the Expiration Date, this warrant shall be deemed to
have been automatically exercised on the Expiration Date by "cashless"
conversion pursuant to Section 1.2.
4.2 Limited Rights of Holder. The Holder shall not, solely by virtue
of being the Holder of this warrant, have any of the rights of a shareholder of
the Company, either at law or equity, until this warrant has been exercised.
4.3 No Fractional Shares. No fractional Shares shall be issued upon
the exercise of this warrant and the number of Shares shall be rounded down to
the nearest whole number.
4.4 Legends. This warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE LAW, AND NO INTEREST THERIN MAY BE SOLD,
DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
(i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING
SAID SECURITIES, (ii) THE COMPANY RECIEIVES AN OPINION OF LEGAL COUNSEL
FOR THE HOLDER OF SAID SECURITIES SATISFACTORY TO THE COMPANY STATING
THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (iii) THE COMPANY
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
4.5 Compliance with Securities Laws on Transfer. This warrant and
the Shares issuable upon exercise of this warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal
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opinions reasonably satisfactory to the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an Affiliate of
Holder or if there is no material question as to the availability of current
information as referenced in Rule 144(c), Holder represents that it has complied
with Rule 144(d), (e) and (h), the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy of Holder's
notice of proposed sale as filed with the Securities and Exchange Commission
pursuant to Rule 144(h). As used herein, "Affiliate" means the parent company of
Holder, a majority-owned subsidiary of Holder, or a majority-owned subsidiary of
Holder's parent company; provided, however, that such entity is a "qualified
institutional buyer" as defined in Rule 144A as promulgated under the Securities
Act of 1933, as amended.
4.6 Transfer Procedure. Subject to the provisions of Section 4.3,
Holder may transfer all or part of this warrant or the Shares issuable upon
exercise of this warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this warrant
to the Company for reissuance to the transferee(s) (and Holder, if applicable);
provided, however, that Holder may transfer all or part of this warrant to its
Affiliates, including, without limitation, Imperial Bancorp, at any time without
notice to the Company, and such Affiliate shall then be entitled to all the
rights of Holder under this warrant and any related agreements, and the Company
shall cooperate fully in ensuring that any stock issued upon exercise of this
warrant is issued in the name of the Affiliate that exercises the warrant. The
terms and conditions of this warrant shall inure to the benefit of, and be
binding upon, the Company and the holders hereof and their respective permitted
successors and assigns. Unless the Company is filing financial information with
the SEC pursuant to the Securities Exchange Act of 1934, the Company shall have
the right to refuse to transfer any portion of this warrant to any person who
directly competes with the Company.
4.7 Notices. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first- class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time. All notices to the Holder shall be addressed as follows:
Imperial Bank
Attn: Controllers Department
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
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with a copy to:
Imperial Bank
Attn: Warrant Administrator
Special Markets Division
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
to Company:
MHL DEVELOPMENT COMPANY
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4.8 Waiver. This warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.9 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.10 Governing Law. This warrant shall be governed by and construed
in accordance with the laws of the State of Oregon, without giving effect to its
principles regarding conflicts of law.
MHL DEVELOPMENT COMPANY
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Authorized signatories under Corporate Resolutions to Borrow or an authorized
signer(s) under a resolution covering warrants must sign the warrant.
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APPENDIX I
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ____________ shares of
the common stock (the "Common Stock") of MHL DEVELOPMENT COMPANY (the "Company")
pursuant to the terms of the attached warrant (the "Warrant"), and tenders
herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached warrant
into shares of the common stock (the "Common Stock") of MHL DEVELOPMENT COMPANY
(the "Company") in the manner specified in the attached warrant (the "Warrant").
This conversion is exercised with respect to ____________ of the shares covered
by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
Imperial Bank
Attn: Controllers Department
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Or Registered Assignee
3. In connection with the exercise of the Warrant, the undersigned
hereby represents and warrants to you as follows:
(a) Purchase Entirely for Own Account. The Common Stock will
be acquired for investment for the undersigned's own account and not with a view
to the resale or distribution of any part thereof, and the undersigned has no
intention of selling, granting any participation in, or otherwise distributing
the same except in compliance with applicable securities laws to an affiliate of
the undersigned.
(b) Restricted Securities. The undersigned understands that
the Common Stock may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act of 1933 (the "Act") or an exemption
therefrom and, in the absence of an effective registration statement covering
the Common Stock or an available exemption from registration under the Act, the
Common Stock must be held indefinitely.
(c) Investment Experience. The undersigned is experienced in
evaluating and investing in companies in the development stage, can bear the
economic risk of an
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investment in the Common Stock, and has enough knowledge and experience in
financial and business matters to evaluate the merits and risks of an investment
in the Common Stock.
(d) Opportunity to Review Documents and Ask Questions. The
Company has made available to the undersigned all documents and information
requested by the undersigned relating to an investment in the Company. In
addition, the undersigned has had adequate opportunity to ask questions and to
receive answers from the management of the Company covering the terms and
conditions of the offering and the Company's business, management and financial
affairs.
4. The undersigned understands, agrees and recognizes that:
(a) No federal or state agency has made any finding or
determination as to the fairness of the investment or any recommendation or
endorsement of the Common Stock.
(b) All certificates evidencing the Common Stock shall bear
legends substantially similar to the legend set forth in Section 4.4 of the
Warrant.
5. The undersigned is a resident of ____________.
IMPERIAL BANK or Registered Assignee
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(Signature)
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(Date)
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