EXHIBIT 10.4
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER OF THIS
WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT IS SUBJECT TO THE
CONDITIONS SPECIFIED IN ARTICLE 10 OF THE SECURITIES PURCHASE AGREEMENT DATED
OCTOBER 2, 2006 AMONG XXXX MICROPRODUCTS INC., THE TEACHERS' RETIREMENT SYSTEM
OF ALABAMA AND THE EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA (THE "SECURITIES
PURCHASE AGREEMENT"). NO TRANSFER OF THIS WARRANT OR THE SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED. A COPY OF THE SECURITIES PURCHASE AGREEMENT IS ON FILE AND MAY
BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS
WARRANT, BY ACCEPTANCE OF THIS WARRANT, AGREES TO BE BOUND BY THE PROVISIONS OF
THE SECURITIES PURCHASE AGREEMENT.
WARRANT
OF
XXXX MICROPRODUCTS INC.
October 2, 2006
("Issuance Date")
For value received, The Teachers' Retirement System of Alabama and The
Employees' Retirement System of Alabama (collectively and individually, and
jointly and severally, "Investor") is entitled to purchase from Xxxx
Microproducts Inc., a California corporation, or its successor (the "Company")
at any time on or before the fifth anniversary of the Issuance Date, One Hundred
Twenty-Five Thousand (125,000) shares of Common Stock (defined below) (such
shares of Common Stock being hereinafter referred to as the "Warrant Shares").
The exercise price of this Warrant shall be $5.15 per share (the "Warrant
Exercise Price"). The number of Warrant Shares and the Warrant Exercise Price
are subject to adjustment as set forth herein. As used herein, the term "Holder"
means Investor, or any record holder or holders of the Warrant Shares issued
upon exercise, whether in whole or in part, of the Warrant.
This Warrant is subject to the following provisions, terms and
conditions:
1. DEFINITION. The term "Common Stock" shall mean the Company's
authorized common shares, any additional common shares which may be authorized
in the future by the Company, and any stock into which such common shares may
hereafter be changed.
2. EXERCISE; ISSUANCE OF THE WARRANT SHARES.
(a) The rights represented by this Warrant may be exercised by the
Holder, in whole but not in part and not as to a fractional share of Common
Stock, by written notice of exercise delivered to the Company accompanied by the
surrender of this Warrant (properly endorsed if
1
required) at the principal office of the Company and upon payment of an amount
equal to the Warrant Exercise Price for such shares to the Company, in the form
of cash, certified check, bank draft, or securities previously issued by the
Company to the Holder valued at such securities' then fair market value. The
Company agrees that the Warrant Shares so purchased shall be and are deemed to
be issued as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such Warrant Shares as provided in
this subsection (a). Certificates for the Warrant Shares so purchased shall be
delivered to the Holder as soon as practicable after the rights represented by
this Warrant shall have been so exercised. Notwithstanding the foregoing,
however, the Company shall not be required to deliver any certificates for the
Warrant Shares, except in accordance with the provisions and subject to the
limitations of Section 6 below.
(b) For purposes of this Section 2, the "fair market value" of a
security issued by the Company as of a particular date shall be its "market
price," as follows:
(i) if the security is listed on the Nasdaq Global Select
Market, Nasdaq Global Market, Nasdaq Capital Market, or an established
stock exchange, then the average of the prices of such security at the
close of the regular trading session of such market or exchange for the
10 business days immediately preceding such date, or
(ii) if the security is not so listed on the Nasdaq Global
Select Market, Nasdaq Global Market, Nasdaq Capital Market, or an
established stock exchange, then the average of the closing "bid" and
"asked" prices quoted by the OTC Bulletin Board, the National Quotation
Bureau, or any comparable reporting service for the 10 business days
immediately preceding such date, or
(iii) if the security is not publicly traded as of such date,
the per share value as determined by the Company's Board of Directors.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees that all
Warrant Shares that may be issued upon the exercise of this Warrant will, upon
issuance, be duly authorized and issued, fully paid, nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof. The Company
further covenants and agrees that until expiration of this Warrant, the Company
will at all times have authorized, and reserved for the purpose of issuance or
transfer upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
4. ANTIDILUTION ADJUSTMENTS. The foregoing provisions are, however,
subject to the following:
(a) In case the Company shall at any time subdivide its outstanding
Common Stock into a greater number of shares or declare a dividend payable in
Common Stock, the Warrant Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant shall be proportionately increased, and
conversely, in case the outstanding Common Stock shall be combined into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such
2
combination shall be proportionately increased and the number of shares
of Common Stock purchasable upon the exercise of this Warrant shall be
proportionately reduced.
(b) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets ("Substituted Property") with
respect to or in exchange for such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Holder
shall have the right to purchase and receive upon the basis and upon the terms
and conditions specified in this Warrant and in lieu of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such Substituted Property as would have been
issued or delivered to the Holder if it had exercised this Warrant and had
received upon exercise of this Warrant the Common Stock prior to such
reorganization, reclassification, consolidation, merger or sale.
5. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
6. TRANSFERABILITY; NOTICE OF TRANSFER OF WARRANTS OR RESALE OF WARRANT
SHARES. The Holder, by acceptance hereof, represents and warrants that (a)
Holder is acquiring this Warrant for Holder's own account for investment
purposes only and not with a view to its resale or distribution and (b) Holder
has no present intention to resell or otherwise dispose of all or any part of
this Warrant (however, inasmuch as Holder is a public retirement fund, Holder
may be required in certain circumstances to dispose of all or a part of this
Warrant to satisfy its fiduciary obligations). Other than pursuant to
registration under federal and state securities laws or an exemption from such
registration, the availability of which the Company shall determine in its sole
discretion, (y) the Company will not accept the exercise of this Warrant or
issue certificates for Warrant Shares and (z) neither this Warrant nor any
Warrant Shares may be sold, pledged, assigned or otherwise disposed of (whether
voluntarily or involuntarily). The Company may condition such issuance or sale,
pledge, assignment or other disposition on the receipt from the party to whom
this Warrant is to be so transferred or to whom Warrant Shares are to be issued
or so transferred of any representations and agreements requested by the Company
in order to permit such issuance or transfer to be made pursuant to exemptions
from registration under federal and applicable state securities laws. Each
certificate representing the Warrant (or any part thereof) and any Warrant
Shares shall be stamped with appropriate legends setting forth these
restrictions on transferability. The Holder, by acceptance hereof, agrees to
give written notice to the Company before exercising or transferring this
Warrant or transferring any Warrant Shares of the Holder's intention to do so,
describing briefly the manner of any proposed exercise or transfer.
7. NET EXERCISE RIGHTS.
(a) In addition to and without limiting the rights of the Holder with
respect to other terms of this Warrant, the Holder shall have the right (the
"Conversion Right") to convert this Warrant into Warrant Shares as provided in
this Section 7 at any time prior to its expiration, subject to the restrictions
set forth in subsection (c) below. Upon exercise of the Conversion
3
Right with respect to all, but not less than all, of the Warrant Shares, the
Company shall deliver to the Holder, without payment by the Holder of any
exercise price or any cash or other consideration, that number of shares of
Common Stock equal to the quotient obtained by dividing the Net Value (as
hereinafter defined) of all of the Warrant Shares by the fair market value (as
defined in paragraph (d) below) of a single Warrant Share, determined in each
case as of the close of business on the Conversion Date (as hereinafter
defined). The "Net Value" of the Warrant Shares shall be determined by
subtracting the aggregate warrant purchase price of the Warrant Shares from the
aggregate fair market value of the Warrant Shares. No fractional shares shall be
issuable upon exercise of the Conversion Right, and if the number of shares to
be issued in accordance with the foregoing formula is other than a whole number,
the Company shall pay to the Holder an amount in cash equal to the fair market
value of the resulting fractional share.
(b) The Conversion Right may be exercised by the Holder by the
surrender of this Warrant at the principal office of the Company together with a
notice in the form attached hereto, specifying that the Holder thereby intends
to exercise the Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"), but not later than the expiration date of this Warrant. Certificates for
the Warrant Shares issuable upon exercise of the Conversion Right, together with
a check in payment of any fractional share shall be issued as of the Conversion
Date and shall be delivered to the Holder as soon as practicable following the
Conversion Date.
(c) For purposes of this Section 7, the "fair market value" of a
Warrant Share as of a particular date shall be its "market price", calculated as
of the Conversion Date, as follows:
(i) if the capital stock into which the Warrants are
exercisable is listed on the Nasdaq Global Select Market, Nasdaq Global
Market, Nasdaq Capital Market, or an established stock exchange, then
the average of the prices of such stock at the close of the regular
trading session of such market or exchange for the 10 business days
immediately preceding the Conversion Date, or
(ii) if the capital stock into which the Warrants are
exercisable is not so listed on the Nasdaq Global Select Market, Nasdaq
Global Market, Nasdaq Capital Market, or an established stock exchange,
then the average of the closing "bid" and "asked" prices quoted by the
OTC Bulletin Board, the National Quotation Bureau, or any comparable
reporting service for the 10 business days immediately preceding the
Conversion Date, or
(iii) if the capital stock into which the Warrants are
exercisable is not publicly traded as of such date, the per share value
as determined by the Company's Board of Directors.
8. TRANSFERS. This Warrant shall be transferable only on the books of
the Company by the Holder, or by a duly authorized attorney, on surrender of the
Warrant, properly assigned and in accordance with Section 6.
4
9. MODIFICATIONS, ETC. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
10. REGISTRATION.
(a) REGISTRATION. The Company agrees to (i) promptly after the date
hereof file a registration statement to register under the 1933 Act the Warrant
Shares for resale, (ii) respond promptly and appropriately to any comments
received from the Securities and Exchange Commission (the "SEC") with respect to
the registration statement and (iii) file such amendments to the registration
statement as the Company deems appropriate in order to have the SEC declare such
registration statement effective. The Company agrees that upon 10 business days'
notice prior to any period in which the Holder intends to engage in offers or
sales of the Warrant Shares, the Company shall file such amendments or
supplements to the registration statement and/or prospectus as necessary to keep
such registration statement and/or prospectus current for a period of 30 days,
except that the Company shall not be required to maintain the registration
statement and/or prospectus current on more than 2 occasions during any 12-month
period, and the Company shall not be required to file any such amendment or
supplement if it determines that such amendment or supplement would necessitate
the disclosure of material information not otherwise required to be disclosed
pursuant to the Securities Exchange Act of 1934. The Holder by its acceptance
hereof agrees (i) to provide the Company in writing with any information the
Company has requested for use in connection with preparing or filing such
registration statement or prospectus, (ii) to indemnify the Company as provided
below, and (iii) not to engage in any public offering or sale of the Warrant
Shares during any period in which such registration statement and/or prospectus
is not current. The Company's obligation under this Section 10 shall expire
after the period specified in the 1933 Act Rule 144 has elapsed following the
date hereof.
(b) EXPENSES. With respect to the registration pursuant to this Section
10, the Company shall bear the following fees, costs, and expenses: all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, fees and disbursements of counsel for
the underwriter or underwriters of such securities (if the Company is required
to bear such fees and disbursements), all internal expenses, the premiums and
other costs of policies of insurance against liability arising out of the public
offering, and legal fees and disbursements and other expenses of complying with
state securities laws of any jurisdictions in which the securities to be offered
are to be registered or qualified. Fees and disbursements of special counsel and
accountants for the selling Holders, underwriting discounts and commissions, and
transfer taxes for selling Holders and any other expenses relating to the sale
of securities by the selling Holders not expressly included above shall be borne
by the selling Holders.
(c) INDEMNIFICATION. The Company hereby indemnifies each of the Holders
of any Warrant Shares, and the officers and directors, if any, who control such
Holders, within the meaning of Section 15 of the 1933 Act, against all losses,
claims, damages, and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus (and as amended or supplemented if the Company shall have furnished
any amendments thereof or supplements thereto), any preliminary prospectus or
any state securities law filings or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses,
5
claims, damages or liabilities are caused by any untrue statement or omission
contained in information furnished in writing to the Company by such Holder
expressly for use therein; and each such Holder by its acceptance hereof
severally agrees that it will indemnify and hold harmless the Company, each of
its officers who signs such registration statement, and each person, if any, who
controls the Company, within the meaning of Section 15 of the 1933 Act, with
respect to losses, claims, damages or liabilities which are caused by any untrue
statement or omission contained in information furnished in writing to the
Company by such Holder expressly for use therein.
11. NOTICES. All notices required or permitted by this Warrant shall be
effective when given as provided in the Securities Purchase Agreement.
12. GOVERNING LAW. This Warrant shall for all purposes be governed and
interpreted in accordance with the laws of the State of Alabama without regard
to such state's choice of law or conflicts of law provisions, except as may be
mandatorily governed by the corporate laws of the State of California.
(SIGNATURE PAGE FOLLOWS)
6
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and to be dated as of the date set forth above.
THE COMPANY: XXXX MICROPRODUCTS INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
7
TO: Xxxx Microproducts Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
NOTICE OF EXERCISE OF WARRANT -- TO BE EXECUTED BY THE REGISTERED HOLDER
----------------------------- IN ORDER TO EXERCISE THE WARRANT
The undersigned hereby irrevocably elects to exercise the attached
Warrant to purchase for cash all of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares shall be issued in
the name of
---------------------------------------------
Signature*
---------------------------------------------
Print Name
Please insert social security
or other identifying number
of registered holder of
certificate (______________) Address:
---------------------------------------------
---------------------------------------------
Dated: ___________________
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever.
8
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
_____________________ the right to purchase the securities of Xxxx Microproducts
Inc. to which the within Warrant relates and appoints ________________,
attorney, to transfer said right on the books of Xxxx Microproducts Inc., with
full power of substitution in the premises.
Dated:
------------------- ---------------------------------
Signature
---------------------------------
Print Name
Address:
---------------------------------
---------------------------------
9
CASHLESS EXERCISE FORM
(TO BE EXECUTED UPON EXERCISE OF WARRANT PURSUANT TO SECTION 7)
The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Warrant for, and to purchase
thereunder, the Warrant Shares, as provided for in Section 7 therein.
Please issue a certificate or certificates for such Warrant Shares in
the name of, and pay any cash for any fractional share to:
Name
-------------------------------------
(Please print Name)
Address
----------------------------------
----------------------------------
Tax ID or Social Security No.
-------------
------------------------------------------
Signature
------------------------------------------
Print Name
NOTE: The above signature should correspond exactly with the name on
the first page of this Warrant or with the name of the assignee appearing in the
assignment form above.
10
