EXHIBIT 10.38
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THIS WARRANT AND THE SHARES OF COMMON STOCK ISUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRASFEREED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
WARRANT TO PURCHASE STOCK
Issuer: ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. a Delaware corporation
Number of Shares: As set forth below
Class of Stock: Common Stock, $.01 par value per share
Exercise Price: As set forth below
Issue Date: June 29, 2000
Expiration Date: As set forth below
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, this Warrant is issued to WPP Dotcom
Holdings (Twelve) LLC ("Holder") by ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation
(the "Company").
This Warrant is being issued to Holder, and affiliate of J. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ U.S.A., Inc. ("JCT"), as additional inducement for JWT to enter into
the Strategic Alliance Agreement dated June 29, 2000 between JWT and the
Company.
Subject to the terms and conditions hereinafter set forth, the Holder
is entitled upon surrender of this Warrant and the duly executed subscription
form annexed hereto as Appendix 1, at the office of the Company, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other office as the
Company shall notify the Holder of in writing, to purchase from the Company such
number of fully paid and non-assessable shares of the Company's common stock,
$.01 par value per share ("Common Stock") such that upon exercise, Holder shall
own five percent (5%) of the total capital stock of the Company on a fully
diluted basis at the time of exercise (the "Shares"). The purchase price per
Share shall be the Exercise Price. The number of Shares subject to this Warrant
shall be locked in on the earlier of the date immediately prior to (i) the
exercise of this Warrant, (ii) an Acquisition (as defined below) or (iii) the
consummation of the Company's initial, registered, firm-commitment underwritten
public offering of its Common Stock and in which the shares of Common Stock sold
by the Company in such offering are approved for trading or quotation on a
national securities exchange or the NASDAQ National Market (a "Qualified IPO").
This Warrant may be exercised in whole but not in part at any time and from time
to time until 5:00 PM, Eastern time, on the earlier to occur of (i) the date 24
months from the Issue Sate and (ii) the date immediately prior to a Qualified
IPO, and shall be void thereafter (the "Expiration Date").
A. Exercise Price.
The Exercise Price shall be based on a per Share value based on a total
capitalization value for the Company at the time of exercise of $100,000,000.
ARTICLE I
EXERCISE
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1.1 Method of Exercise. Holder may exercise this Warrant by delivering
a duly executed Notice of Exercise (a "Notice") in substantially he 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 certified check for, or deliver by wire transfer to an
account specifies by the Company, the aggregate Exercise Price for the Shares
being purchased.
1.2 Delivery of Certificate and New Warrant. The Company shall, as
promptly as practicable and in any event within five Business Days after receipt
of such Notice and payment, execute and deliver or cause to be executed and
delivered, in accordance with such Notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
Notice. The share certificate or certificates so delivered shall be in such
denominations as may be specified in such Notice and shall be issued in the name
of the Holder or such other name or names as shall be designated in such Notice;
provided, that any such transfer to a person other than the Holder complies with
the registration requirements of the Securities Act or and exemption therefrom.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and such Holder or any other
Person so designated to be named therein shall be deemed for all purposes to
have become a holder of record of shares, as of the date the aforementioned
Notice and payment is received by the Company. The Company shall pay all
expenses, taxes and other charges payable by the Holder in connection with the
preparation, issuance and delivery of share certificates, except taxes, if any,
as a result of the share certificates not being issued in the name of the
Holder.
1.3 Repurchase on Sale, Merger, or Consolidation of the Company.
1.3.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
means any sale, transfer, exclusive license, or other disposition of all or
substantially all of the assets of the Company, or any securities transaction,
reorganization, consolidation or merger of the Company where the holders of the
Company's outstanding voting equity securities immediately prior to the
transaction beneficially own less than 50.1% of the outstanding voting equity
securities of the surviving or successor entity immediately after the
transaction.
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1.3.2 Assumption of Warrant. Upon the closing of any Acquisition
(other than an Acquisition in which the consideration received by the Company or
its stockholders, as the case may be, consists solely of cash), the successor or
surviving entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same securities 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 Exercise Price shall be adjusted accordingly.
ARTICLE 2
ADJUSTMENTS
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2.1 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, reorganization or other event that
results in a change of the number and/or class of the Common Stock, Holder shall
be entitled to receive, upon exercise or conversion of this Warrant, the number
and kind of securities and property hat Holder would have received for the
substitution, reorganization or other event. The Company or its successor shall
promptly issue to Holder a new Warrant for such new securities or other
property. The provisions of this Section 2.1 shall similarly apply to successive
reclassifications, exchanges, substitutions, reorganizations or other events.
2.2 No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation, as amended, 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 of 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 against impairment.
2.3 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded up to the nearest whole Share.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) All Shares and other securities which may be issued upon the
due exercise of this Warrant, shall upon issuance, be duly authorized, validly
issued, fully paid and non-
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assessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws.
(b) The authorized capital stock of the Company consists of
25,000,000 shares of common stock, $.01 par value per share. Schedule3.1(b) sets
forth all of the outstanding shares of common stock and preferred stock and
outstanding options, warrants, convertible securities, convertible debentures,
and rights to acquire, subscribe for, and/or purchase any Common Stock,
preferred stock and/or other capital stock, preferred stock and/or other capital
stock of the Company.
(c) The Company covenants that I shall at all times cause to be
reserved and kept available out of its authorized and unissued shares such
number of shares of its Common Stock and other securities as will be sufficient
to permit the exercise in full of this Warrant.
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 its Common Stock any
additional shares of stock of any class or series or other rights; (c) to amend
the Certificate of Incorporation of the Company in any way which would be alter
or change the powers, preferences, or special rights of any of its securities,
including without limitation, any reclassification or recapitalization, to
effect any amendment; (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; or (e) offer holders of
registration rights the opportunity to participate in an underwritten public
offering of the Company's securities for cash, 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 securities of the Company will be entitled to receive such dividend,
distribution or subscription rights) or for determining rights to vote, if any,
in respect of the matters referred to in (c) and (d) above; (2) in the case o
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 securities of the Company will be entitled to exchange
their securities of the Company for securities or other property deliverable
upon the occurrence of such event); and (3) in the case of the matter referred
to in (e) above, the same notice as is given to the holders of such registration
rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within one-hundred and twenty (120) days after
the end of each fiscal year of the Company, the annual unaudited financial
statements of the Company prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") and (c) within sixty (60)
days after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements which beginning in calendar
year 2001, shall be prepared I accordance with GAAP.
4
3.4 Board Representation. The board of Directories of the Company (the
"Board") shall be comprised of eleven (11) directors. The Company agrees that
the number of directors constituting the Board shall not be changed without the
written consent of the Holder Directors (as defined herein). For as long as
Holder or any of its affiliates holds Common Stock or Warrants of the Company,
Holder shall have the right to appoint to the Board two directors, who shall
initially be ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Holder Directors"), and
the Company hereby covenants and agrees to take any and all action necessary for
the election of each of the Holder Directors. In the event Holder elects to
remove an initial Holder Director and subsequently designates a substitute
director, the Company hereby covenants and agrees to take any and all action
necessary for the election of such substitute director.
ARTICLE 4
WARRANT AGENCY; TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANT
----------------------
4.1 Warrant Agency. As long as the Warrant remains outstanding, the
Company shall perform obligations of an be the warrant agency with respect to
the Warrant (the "Warrant Agency") at its address set forth in the Agreement or
at such other address as the Company shall specify by notice to the Holder.
4.2 Ownership of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and beneficial owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until due presentment of this Warrant for registration of
transfer of transfer or exercise as provided herein.
4.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrants, and transfers of
this Warrant and all rights hereunder shall be registered, in whole but not in
part, on such books, upon surrender of this Warrant at the Warrant Agency,
together with a written assignment of this Warrant duly executed by the Holder
or its duly authorized agent or attorney. Upon surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in the instrument of assignment
(which shall be whole numbers of shares only) and this Warrant shall promptly be
canceled.
4.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence reasonably satisfactory to the Company of the ownership of and the
loss, theft, destruction or mutilation of any Warrant and, in the case of any
such loss, theft, or destruction, upon receipt of indemnity or security
satisfactory to the Company (it being understood and agreed that if the holder
of such Warrant is Holder, then a written agreement of indemnity given by the
Holder alone shall be satisfactory to the Company and no further security shall
be required) or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company
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will make an deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor and representing the right to purchase the
same aggregate number of Shares.
4.5 Expenses of Delivery if Warrants. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issuance and delivery of Warrants hereunder.
ARTICLE 5
MISCELLANEOUS
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5.1 Term; Notice of Expiration. This Warrant is exercisable, in whole
but not in part, at any time and from time to time on or before the Expiration
Date set forth above.
5.2 Legends; This Warrant and the Shares shall be imprinted with a
legend in substantially the follow form:
THIS SECURITY HAS 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.
5.3 Compliance with Securities Laws on transfer. This warrant and the
Shares may not be transferred or assigned 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 opinions reasonably satisfactory to the Company, as reasonably
requested by 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 (a) there
is no material question as to the availability of current information as
referenced in Rule 144(c), (b) Holder represents that it has complied with Rule
144(d) and (e) in reasonable detail, (c) the selling broker represents that it
has complied with Rule 144(f), and (d) the Company is provided with a copy of
Holder's notice of proposed sale; provided; however with respect to clauses (a),
(b), (c) and (d) above, the Holder shall obtain an opinion of counsel if
requested by the Company and the expenses of such counsel shall be paid by the
Company.
5.4 Transfer Procedure. Subject to the provisions of Section 5.3,
Holder may transfer all or part of this Warrant and/or the Shares issuable upon
exercise of this Warrant at any time by giving the Company notice of such
transfer 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).
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5.5. 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 sent by electronic facsimile transmission, express overnight
courier service, or mailed first-class registered or certified mail, postage
prepaid, at such address as may 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, but
in all cases, unless instructed in writing otherwise, the Company shall deliver
a copy of all notices to Holder to WPP Dotcom Holdings (Twelve) LLC, c/o WPP
Group USA, Inc.,309 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn. ▇▇▇▇▇▇
▇▇▇▇▇▇.
5.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by and instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.7 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.
5.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of The State of New York, without giving effect to its
principles regarding conflicts of law.
5.9 Transfer; Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company or the Holder shall bind its successors and assigns, whether so
expressed or not. This Warrant shall be transferable and assignable by the
Holder hereof in whole but not in part to any other Person and the provisions of
this Warrant shall be binding upon and inure to the benefit of the Holder hereof
and its successors and assigns.
5.10 Severability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
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5.11 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
COMPANY
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▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇▇▇-▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇ ▇▇▇▇
Title: CEO
[CORPORATE SEAL]
Attest:
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: CFO/CAO
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APPENDIX 1
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NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _______shares of the
__________ stock of ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. pursuant to Section 1.1 of the attached
Warrant, and tenders herewith payment of the Exercise Price of such shares in
full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in Section 1.2 of the attached Warrant. This
conversion is exercised with respect to ____________ of shares of the
________________________ stock of ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as specified below:
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(Name)
--------------------------------------------
--------------------------------------------
(Address)
4. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
-----------------------------------
(Signature)
---------------------
(Date)
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ValueFlash - List of Shareholders - CONFIDENTIAL -
------------------- ---------------------------------------- ---------------------------------- ------------------------------------
Certificate # Name Address # of Shares
------------------- ---------------------------------------- ---------------------------------- ------------------------------------
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
1 5,000,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
2 125,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
3 300,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
4 100,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
5 100,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
6 75,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
7 500,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
8 50,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
Total issued 6,250,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
Options issued 10,920,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
Grand Total 17,170,000
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
------------------- ---------------------------------------- ---------------------------------- ---------------------- -------------
Performance based options issued 3,000,000
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20,170,000
Performance based options under negotiation 2,500,000
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Proforma total 22,670,000
Excludes any proposed shares to be issued to JWT
