EXHIBIT 10.7
WARRANT AGREEMENT
BETWEEN
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
AND
▇▇▇▇▇▇ EQUITY PARTNERS, LLC
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS
(i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER THAT CERTAIN INVESTMENT AGREEMENT
BY AND BETWEEN THE COMPANY AND HOLDER REFERENCED THEREIN AS EXHIBIT J.
Warrant to Purchase
"N" shares Warrant Number ____
WARRANT TO PURCHASE COMMON STOCK
OF
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
THIS CERTIFIES that ▇▇▇▇▇▇ PRIVATE EQUITY, LLC or any subsequent holder
hereof ("Holder"), has the right to purchase from ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, a
Delaware corporation (the "Company"), up to "N" fully paid and nonassessable
shares, wherein "N" is defined below, of the Company's common stock, $0.00035
par value per share ("Common Stock"), subject to adjustment as provided herein,
at a price equal to the Exercise Price as defined in Section 3 below, at any
time beginning on the Date of Issuance (defined below) and ending at 5:00 p.m.,
New York, New York time the date that is five (5) years after the Date of
Issuance (the "Exercise Period"); provided, that, with respect to each "Put," as
that term is defined in that certain Investment Agreement (the "Investment
Agreement") by and between the initial Holder and Company, dated on or about
August 15, 2000, "N" shall equal ten percent (10%) of the number of shares of
Common Stock purchased by the Holder in that Put.
Holder agrees with the Company that this Warrant to Purchase Common
Stock of the Company (this "Warrant") is issued and all rights hereunder shall
be held subject to all of the conditions, limitations and provisions set forth
herein.
1. DATE OF ISSUANCE AND TERM.
This Warrant shall be deemed to be issued on _____________, ______
("Date of Issuance"). The term of this Warrant is five (5) years from the Date
of Issuance.
Notwithstanding anything to the contrary herein, the Holder shall not
exercise this warrant if and to the extent that the number of shares of Common
Stock to be issued to Holder upon such exercise, when added to the number of
shares of Common Stock, if any, that the Holder otherwise beneficially owns at
the time of such exercise, would equal or exceed 4.99% of the number of shares
of Common Stock then outstanding, as determined in accordance with Section 13(d)
of the Exchange Act (the "4.99% Limitation"). The 4.99% Limitation shall be
conclusively satisfied if the applicable Exercise Notice includes a signed
representation by the Holder that the issuance of the shares in such Exercise
Notice will not violate the 4.99% Limitation, and the Company shall not be
entitled to require additional documentation of such satisfaction.
2. EXERCISE.
(a) MANNER OF EXERCISE. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number of full shares of Common Stock covered
hereby (the "Warrant Shares") upon surrender of this Warrant, with the Exercise
Form attached hereto as EXHIBIT A (the "Exercise Form") duly completed and
executed, together with the full Exercise Price (as defined below) for each
share of Common Stock as to which this Warrant is exercised, at the office of
the Company, Attention: ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇, CEO, 260 ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, or at such other
office or agency as the Company may designate in writing, by overnight mail,
with an advance copy of the Exercise Form sent to the Company and its Transfer
Agent by facsimile (such surrender and payment of the Exercise Price hereinafter
called the "Exercise of this Warrant").
(b) DATE OF EXERCISE. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile. The Company shall not be required to deliver the shares of Common
Stock to the Holder until the requirements of Section 2(a) above are satisfied.
(c) DELIVERY OF SHARES OF COMMON STOCK UPON EXERCISE. Upon any exercise
of this Warrant, the Company shall deliver, or shall cause its transfer agent to
deliver, a stock certificate or certificates representing the number of shares
of Common Stock into which this Warrant was exercised, within three (3) trading
days of the Date of Exercise (as defined above). Such stock certificates shall
not contain a legend restricting transfer if a registration statement covering
the resale of such shares of Common Stock is in effect at the time of such
exercise or if such shares of Common Stock may be resold pursuant to Rule 144
under the Securities Act of 1933. If the Company has not delivered stock
certificates representing the requisite number of shares of Common Stock
(unlegended, if so required per the above) within three (3) trading days of the
Date of Exercise, the Company shall pay to the Holder liquidated damages equal
to $1,000 per day until such share certificates (unlegended, if so required per
the above) are received by the Holder.
(d) CANCELLATION OF WARRANT. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(e) HOLDER OF RECORD. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
3. PAYMENT OF WARRANT EXERCISE PRICE.
The Exercise Price ("Exercise Price"), shall initially equal $Y per
share ("Initial Exercise Price"), where "Y" shall equal 110% of the Market Price
for the applicable Put (as both are defined in the Investment Agreement) or, if
the Date of Exercise is more than six (6) months after the Date of Issuance, the
lesser of (i) the Initial Exercise Price or (ii) the "Lowest Reset Price," as
that term is defined below. The Company shall calculate a "Reset Price" on each
six-month anniversary date of the Date of Issuance which shall equal of the
lowest Closing Bid Price of the Common Stock for the five (5) trading days
ending on such six-month anniversary date of the Date of Issuance. The "Lowest
Reset Price" shall equal the lowest Reset Price determined on any six-month
anniversary date of the Date of Issuance preceding the Date of Exercise, taking
into account, as appropriate, any adjustments made pursuant to Section 5 hereof.
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the O.T.C. Bulletin Board, the National Market System ("NMS"), the
New York Stock Exchange, the Nasdaq Small Cap Market, or if no longer traded on
the O.T.C. Bulletin Board, the NMS, the New York Stock Exchange, the Nasdaq
Small Cap Market, the "Closing Bid Price" shall equal the closing price on the
principal national securities exchange or the over-the-counter system on which
the Common Stock is so traded and, if not available, the mean of the high and
low prices on the principal national securities exchange on which the Common
Stock is so traded.
Payment of the Exercise Price may be made by either of the following, or
a combination thereof, at the election of Holder:
(i) CASH EXERCISE: cash, bank or cashiers check or wire transfer; or
(ii) CASHLESS EXERCISE: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
Where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant
is being exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average closing price of the Common Stock for the
five (5) trading days prior to the Date of Exercise of this
Warrant (the "Average Closing Price"), as reported by the O.T.C.
Bulletin Board, National Association of Securities Dealers
Automated Quotation System ("Nasdaq") Small Cap Market, or if the
Common Stock is not traded on the Nasdaq Small Cap Market, the
Average Closing Price in any other over-the-counter market;
provided, however, that if the Common Stock is listed on a stock
exchange, the Market Price shall be the Average Closing Price on
such exchange for the five (5) trading days prior to the date of
exercise of the Warrants. If the Common Stock is/was not traded
during the five (5) trading days prior to the Date of Exercise,
then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable)
days during such five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it
is intended, understood and acknowledged that the Common Stock issuable upon
exercise of this Warrant in a cashless exercise transaction shall be deemed to
have been acquired at the time this Warrant was issued. Moreover, it is
intended, understood and acknowledged that the holding period for the Common
Stock issuable upon exercise of this Warrant in a cashless exercise transaction
shall be deemed to have commenced on the date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant
may not be exercised in a cashless exercise transaction if, on the Date of
Exercise, the shares of Common Stock to be issued upon exercise of this Warrant
would upon such issuance be then registered pursuant to an effective
registration statement filed pursuant to that certain Registration Rights
Agreement dated on or about August 11, 2000 by and among the Company and certain
investors, or otherwise be registered under the Securities Act of 1933, as
amended.
4. TRANSFER AND REGISTRATION.
(a) TRANSFER RIGHTS. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) REGISTRABLE SECURITIES. The Common Stock issuable upon the exercise
of this Warrant constitutes "Registrable Securities" under that certain
Registration Rights Agreement dated on or about August 15, 2000 between the
Company and certain investors and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
5. ANTI-DILUTION ADJUSTMENTS.
(a) STOCK DIVIDEND. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) RECAPITALIZATION OR RECLASSIFICATION. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which Holder shall be
entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give Holder the same notice it provides to holders of Common Stock
of any transaction described in this Section 5(b).
(c) DISTRIBUTIONS. If the Company shall at any time distribute for no
consideration to holders of Common Stock cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or preceding years) then,
in any such case, Holder shall be entitled to receive, upon Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board of Directors of the Company in its discretion) and the denominator of
which is such Exercise Price.
(d) NOTICE OF CONSOLIDATION OR MERGER. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event,
as a result of which shares of Common Stock shall be changed into the same or
a different number of shares of the same or another class or classes of stock
or securities or other assets of the Company or another entity or there is a
sale of all or substantially all the Company's assets (a "Corporate Change"),
then this Warrant shall be exerciseable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however,
that Company may not affect any Corporate Change unless it first shall have
given thirty (30) days notice to Holder hereof of any Corporate Change.
(e) EXERCISE PRICE ADJUSTED. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $0.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $0.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the net effect of
increasing the Exercise Price in relation to the split adjusted and distribution
adjusted price of the Common Stock. The number of shares of Common Stock subject
hereto shall increase proportionately with each decrease in the Exercise Price.
(f) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. FRACTIONAL INTERESTS.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock. If,
on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.
7. RESERVATION OF SHARES.
The Company shall at all times reserve for issuance such number
of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued, fully
paid, nonassessable and not subject to preemptive rights, rights of first
refusal or similar rights of any person or entity.
8. RESTRICTIONS ON TRANSFER.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act by
virtue of Regulation D and exempt from state registration under applicable state
laws. The Warrant and the Common Stock issuable upon the Exercise of this
Warrant may not be pledged, transferred, sold or assigned except pursuant to an
effective registration statement or an exemption to the registration
requirements of the Act and applicable state laws.
(b) ASSIGNMENT. If Holder can provide the Company with reasonably
satisfactory evidence that the conditions of (a) above regarding registration or
exemption have been satisfied, Holder may sell, transfer, assign, pledge or
otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a
written notice to Company, substantially in the form of the Assignment attached
hereto as EXHIBIT B, indicating the person or persons to whom the Warrant shall
be assigned and the respective number of warrants to be assigned to each
assignee. The Company shall effect the assignment within ten (10) days, and
shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of
like tenor and terms for the appropriate number of shares.
9. BENEFITS OF THIS WARRANT.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy or
claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and Holder.
10. APPLICABLE LAW.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Georgia,
without giving effect to conflict of law provisions thereof.
11. LOSS OF WARRANT.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
12. NOTICE OR DEMANDS.
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the address set
forth in Section 2(a) above. Notices or demands pursuant to this Warrant to be
given or made by the Company to or on Holder shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, to the address of Holder set forth in the Company's
records, until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
28th day of June, 2000.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇, CEO
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, CEO
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, a Delaware corporation (the "Company"), evidenced by the
attached warrant (the "Warrant"), and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or
otherwise dispose of any of the Common Stock obtained on exercise of the
Warrant, except in accordance with the provisions of Section 8(a) of the
Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated:
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Signature
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Print Name
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Address
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NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint _______________________ attorney to transfer
the said Warrant on the books of the Company, with full power of substitution in
the premises.
Dated: _________ ___________________________
Signature
Fill in for new registration of Warrant:
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Name
-----------------------------------
Address
-----------------------------------
Please print name and address of assignee
(including zip code number)
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NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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