THIS WARRANT AND THE SHARES OF COMMON STOCK UNDERLYING THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SECURITIES
ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 5 OF THIS WARRANT
Warrant No. ________ Number of Shares:__________
(subject to adjustment)
Date of Issuance: ________ ____, ___
XXX XXXXXX, INC.
Form of
Common Stock Purchase Warrant
Xxx Xxxxxx, Inc., a Washington corporation (the "Company"), for value
received, hereby certifies that [recipient], or his, her or its registered
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date of this Warrant and on or
before the Termination Date (as defined in Section 15 hereof) of this Warrant
(the "Exercise Period"), that number of shares (the "Warrant Shares") of common
stock, par value $.01 per share, of the Company (the "Common Stock") as set
forth in Section 2.a. hereof, and at an exercise price per share set forth in
Section 1. Capitalized words not defined herein shall have the meanings set
forth in the Securities Purchase Agreement, dated as of February __, 1999.
1. Exercise Price.
The exercise price at which this Warrant may be exercised shall be equal to
[$0.15 per share][$ _______ per share of Common Stock, which is equal to the
average Fair Market Value (as defined below) for the 15 trading days prior to
the Date of Issuance (the "Exercise Price")]. Upon a Change of Control or
Redemption Event (as defined in the Statement of rights and
1
Preferences of Series D Preferred Stock), the Exercise Price shall be reduced to
$.01 and shall remain as the Exercise Price throughout the Exercise Period.
2. Exercise of Warrant.
a. Number of Shares for Which Warrant is Exercisable. This Warrant
shall initially be exercisable to purchase [_________] shares of
Common Stock. The number of Warrant Shares issuable upon exercise
of this Warrant shall be subject to adjustment as set forth in
Section 3 hereof.
b. Procedure for Exercise of Warrant. The Warrant may be exercised
in whole or in part on any date during the Exercise Period (each
an "Exercise Date") by surrendering this Warrant, with the
purchase form provided for herein duly executed by the Holder or
by the Holder's duly authorized attorney-in-fact, at the
principal office of the Company or at such other office or agency
in the United States as the Company may designate by notice in
writing to the Holder, accompanied by payment (i) in cash, bank
cashier's check or certified check payable to the order of the
Company, or (ii) by cancellation by the Holder of indebtedness or
other obligations of the Company to the Holder or (iii) by a
combination of (i) and (ii), equal to the product of (x) the
Exercise Price multiplied by (y) the number of Warrant Shares
being purchased.
c. Conversion. In addition to and without limiting the rights of the
Holder under the terms of this Warrant, the Holder shall have the
right to convert this Warrant or any portion thereof (the
"Conversion Right") into shares of Common Stock as provided in
this subsection 1.c. The Holder may exercise this Conversion
Right on any date during the Exercise Period (the "Conversion
Date") by surrendering this Warrant as described in subsection
2.b. above, together with a notice of conversion, the form of
which is attached hereto as Exhibit II. Upon exercise of the
Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the
Company shall deliver to the Holder (without payment by the
Holder of any exercise price or any cash or other consideration)
(x) that number of Warrant Shares equal to the quotient obtained
by dividing the value of this Warrant (or the specified portion
hereof) on the Conversion Date by (y) the Fair Market Value of
one share of Common Stock on the Conversion Date. The value of
this Warrant shall be determined by subtracting (A) the aggregate
Exercise Price of the Converted Warrant Shares on the Conversion
Date from (B) the aggregate Fair Market Value (as defined below)
of the Converted Warrant Shares on the Conversion Date.
Expressed as a formula, the number of Warrant Shares issuable upon such
conversion shall be computed as follows:
X = B-A
---
Y
2
Where: X = the number of shares of Common Stock that may be
issued to Holder
Y = the Fair Market Value of one share of Common Stock
A = the aggregate Exercise Price (i.e., Converted Warrant
Shares multiplied by the Exercise Price)
B = the aggregate Fair Market Value (i.e., Converted
Warrant Shares multiplied by the Fair Market Value)
The Fair Market Value per share of Common Stock shall be determined as
follows:
i. If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq SmallCap
Market, the Nasdaq Bulletin Board, or another nationally
recognized exchange or trading system as of the Conversion
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the last reported sale price per share of
Common Stock thereon on the Conversion Date; or, if no such
price is reported on such date, such price on the next
preceding business day; or, if no such price is reported on
such date, the average of the mean of the high closing bid
and the low closing asked prices for the three preceding
business days (provided that if no such price is reported
for the three preceding business days, the Fair Market Value
per share of Common Stock shall be determined pursuant to
clause (ii)).
ii. If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq SmallCap
Market, the Nasdaq Bulletin Board or another nationally
recognized exchange or trading system as of the Conversion
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the amount most recently determined by the
Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options
or issuing Common Stock under an employee benefit plan of
the Company). Notwithstanding the foregoing, if the Board of
Directors has not made such a determination within the
three-month period prior to the Conversion Date, then (A)
the Fair Market Value per share of Common Stock shall be the
amount next determined by the Board of Directors to
represent the fair market value per share of the Common
Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company), and
(B) the exercise of this Warrant pursuant to this
3
subsection 2.c. shall be delayed for a period of up to one
month until such determination is made.
d. Each exercise or conversion of this Warrant shall be deemed to
have been effected immediately prior to the close of business on
each Exercise Date or Conversion Date. At such time, the person
or persons in whose name or names any certificates for Warrant
Shares shall be issuable upon such exercise as provided in
subsection 2.c. below shall be deemed to have become the holder
or holders of record of the Warrant Shares represented by such
certificates.
e. As soon as practicable after the exercise or conversion of this
Warrant in full or in part, and in any event within ten (10) days
thereafter, the Company, at its expense, will cause to be issued
in the name of, and delivered to, the Holder, or as such Holder
(upon payment by such Holder of any applicable transfer taxes)
may direct:
i. a certificate or certificates for the number of full Warrant
Shares to which such Holder shall be entitled upon such
exercise or conversion plus, in lieu of any fractional share
to which such Holder would otherwise be entitled, cash in an
amount determined pursuant to Section 4 hereof; and
ii. in case such exercise or conversion is in part only, a new
warrant or warrants (dated the date hereof) of like tenor,
calling in the aggregate on the face or faces thereof for
the number of Warrant Shares equal (without giving effect to
any adjustment therein) to the number of such shares called
for on the face of this Warrant minus the sum of (a) the
number of such shares delivered to the Holder upon such
exercise or conversion plus (b) the number of Warrant Shares
(if any) canceled in payment of the Exercise Price or
pursuant to the exercise of the Conversion Right.
3. Adjustments.
a. If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, the
Exercise Price in effect immediately prior to such subdivision or
at the record date of such dividend shall simultaneously with the
effectiveness of such subdivision or immediately after the record
date of such dividend be proportionately reduced. If outstanding
shares of Common Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such
combination shall, simultaneously with the effectiveness of such
combination, be proportionately increased. When any adjustment is
required to be made in the Exercise Price, the number of Warrant
Shares purchasable upon the exercise or conversion of this
Warrant shall be changed to the number determined by dividing (i)
an amount equal to the number
4
of shares issuable upon the exercise of this Warrant immediately
prior to such adjustment, multiplied by the Exercise Price in
effect immediately prior to such adjustment, by (ii) the Exercise
Price in effect immediately after such adjustment.
b. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or a subdivision or combination as provided
for in subsection 3.a. above), or any consolidation or merger of
the Company with or into another corporation, or a transfer of
all or substantially all of the assets of the Company, then, as
part of any such reorganization, reclassification, consolidation,
merger or sale, as the case may be, lawful provision shall be
made so that the Holder of this Warrant shall have the right
thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which
such Holder would have been entitled to receive if, immediately
prior to any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, such Holder
had held the number of shares of Common Stock which were then
purchasable upon the exercise of this Warrant if exercised for
full in the same manner as that in which the Warrant is actually
exercised. In any such case, appropriate adjustment (as
reasonably determined in good faith by the Board of Directors of
the Company) shall be made in the application of the provisions
set forth herein with respect to the rights and interests
thereafter of the Holder of this Warrant, such that the
provisions set forth in this Section 3 (including provisions with
respect to adjustment of the Exercise Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation
to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
c. If at any time while all or any portion of this Warrant remains
outstanding the Company (i) sells any shares of Common Stock of
the Company at a price per share less than the Exercise Price per
share then applicable to this Warrant, or (ii) issues any
security convertible into shares of Common Stock of the Company
with a conversion price per share less than the Exercise Price
per share then applicable to this Warrant, or (iii) issues any
option, warrant or other right to purchase shares of Common Stock
of the Company at any exercise price per share less than the
Exercise Price per share then applicable to this Warrant (except,
in each case, pursuant to an employee or director stock option
plan or similar compensation plan approved by the Board of
Directors); then in any and every such event the Exercise Price
per share for this Warrant shall be reduced and shall be equal to
such lower sales, conversion or exercise price per share.
d. When any adjustment is required to be made pursuant to this
Section 3, the Company shall promptly mail to the Holder a
certificate setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such certificate shall also set forth
the kind and amount of stock or other securities or property into
which this Warrant shall be
5
exercisable following the occurrence of any of the events
specified in subsection 2(a) or 2(b) above.
4. Fractional Shares. The Company shall not be required upon the exercise or
conversion of this Warrant to issue any fractional shares. In lieu of any
fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment to the Holder equal to the Fair Market
Value per share of Common Stock multiplied by such fraction.
5. Requirements for Transfer.
a. This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been
registered under the Act or (ii) the Company first shall have
been furnished with an opinion of legal counsel, reasonably
satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Act.
b. Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Holder which is
a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or
to the estate of any such partner or retired partner, if the
transferee agrees in writing to be subject to the terms of this
Section 5, or (ii) a transfer made in accordance with Rule 144
under the Act.
c. Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
6. No Impairment. The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
6
7. Liquidating Dividends. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles) except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the Company will
pay or distribute to the Holder of this Warrant, upon the exercise hereof,
in addition to the Warrant Shares purchased upon such exercise, the
Liquidating Dividend which would have been paid to such Holder if he had
been the owner of record of such Warrant Shares immediately prior to the
date on which a record is taken for such Liquidating Dividend or, if no
record is taken, the date as of which the record holders of Common Stock
entitled to such dividends or distribution are to be determined.
8. Notices of Record Date, etc. In case:
a. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon
the exercise of this Warrant) for the purpose of entitling or
enabling them to receive any dividend or other distribution, or
to receive any right to subscribe for or purchase any shares of
stock of any class or any other securities, or to receive any
other right; or
b. of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the
Company is the surviving entity), or any transfer of all or
substantially all of the assets of the Company; or
c. of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to
the Holder of this Warrant a notice specifying, as the case may be, (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer,
dissolution/ liquidation or winding-up is to take place, and the time, if
any is to be fixed, as of which the holders of record of Common Stock (or
such other stock or securities at the time deliverable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock
(or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall
be mailed at least ten (10) days prior to the record date or effective date
for the event specified in such notice.
9. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this
Warrant, such number of Warrant Shares and other stock, securities and
property, as from time to time shall be issuable upon the exercise of this
Warrant.
7
10. Exchange of Warrants. Upon the surrender by the Holder of any Warrant or
Warrants, properly endorsed, to the Company at the principal office of the
Company, the Company will, subject to the provisions of Section 5 hereof,
issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such
Holder or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. Upon 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) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
12. Transfers, etc.
a. The Company will maintain a register containing the names and
addresses of the Holders of this Warrant and all comparable
Warrants. Any Holder may change his, her or its address as shown
on the warrant register by written notice to the Company
requesting such change.
b. Subject to the provisions of Section 5 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in
the form of Exhibit III hereto) at the principal office of the
Company.
c. Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that
if and when this Warrant is properly assigned in blank, the
Company may (but shall not be obligated to) treat the bearer
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
13. Mailing of Notices, etc. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first-class
certified or registered mail, or overnight courier service, postage
prepaid, to the address set forth in the Preferred Stock Purchase
Agreement. All notices and other communications from the Holder of this
Warrant or in connection herewith to the Company shall be mailed by
first-class certified or registered mail or overnight courier service,
postage prepaid, to the Company at its principal office set forth below.
The principal office of the Company is as follows:
8
Xxx Xxxxxx, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
14. No Rights as Stockholder. Until the exercise of this Warrant, the Holder of
this Warrant shall not have or exercise any rights by virtue hereof as a
stockholder of the Company.
15. Governing Law. This Warrant will be governed by and construed in accordance
with the laws of the State of Delaware.
16. Termination. Unless previously exercised pursuant to the terms of this
Warrant, the right to exercise this Warrant shall expire at
5:00 p.m. (Pacific time) on ______ __, 2004 (the "Termination Date").
Notwithstanding the foregoing, if on the Termination Date, the Fair Market
Value per share of the Common Stock exceeds the Exercise Price per share of
the Warrant Shares, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of Section 2.c. hereof,
without any further action on behalf of the Registered Holder, immediately
prior to the time this Warrant would otherwise expire on the Termination
Date pursuant to the preceding sentence.
XXX XXXXXX, INC.
By:_____________________________________
Title:__________________________________
9
EXHIBIT I
PURCHASE FORM
To: Xxx Xxxxxx, Inc. Dated: __________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.___), hereby irrevocably elects to purchase _______ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full Exercise Price for such shares at the
Exercise Price per share provided for in such Warrant. Such payment takes the
form of (check applicable box or boxes):
o $__________ in lawful money of the United States, and/or
o the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ Warrant Shares (using a Fair
Market Value of $________ per share for purposes of this
calculation).
Signature:______________________________
Address:________________________________
________________________________
EXHIBIT II
NOTICE OF CONVERSION
To: Xxx Xxxxxx, Inc. Dated: ____________________
The undersigned hereby elects to convert the attached Warrant into such
number of shares of Common Stock of Xxx Xxxxxx, Inc. as is determined pursuant
to Section 1(c) of this Warrant, which conversion shall be effected pursuant to
the terms of the attached Warrant.
Signature:______________________________
Address:________________________________
________________________________
EXHIBIT III
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (No. ____) with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated:_______________________ Signature:______________________________
Dated:_______________________ Witness:________________________________
