EXHIBIT 18
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. NEITHER
THIS WARRANT NOR THE SECURITIES ISSUABLE UPON ITS EXERCISE MAY BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO EPICEDGE, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
WARRANT
TO PURCHASE SERIES B-1 PREFERRED STOCK OF
EPICEDGE, INC.
THIS WARRANT IS TO CERTIFY THAT Edgewater Private Equity Fund III, L.P.
("Purchaser"), is entitled to purchase from EpicEdge, Inc., a Texas corporation
(the "Company"), the number of shares of the Company's Series B-1 Convertible
Preferred Stock, par value $.01 per share ("Preferred Stock"), as shall be
determined in accordance with the provisions of Section 2 at a price per share
of $0.01, as adjusted from time to time pursuant to Section 4 (the "Exercise
Price"). This Warrant has been issued to Purchaser in partial consideration of
certain loans and other financial accommodations made by Purchaser to the
Company.
Section 1. Certain Definitions. As used in this Warrant, unless the
context otherwise requires:
"Registration Rights Agreements" shall mean that certain Registration
Rights Agreement dated as of February 18, 2000, and that certain Registration
Rights Agreement dated as of September 29, 2000, each as among the Company and
the parties identified therein, as each such agreement may be amended, modified
or restated from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Warrant" shall mean this Warrant and all additional or new warrants
issued upon division or combination of, or in substitution for, this Warrant.
All such additional or new warrants shall at all times be identical as to terms,
conditions and date, except as to the number of shares of Warrant Stock for
which they may be exercised.
"Warrantholder" shall mean Purchaser, as the initial holder of this
Warrant, and its nominees, successors or assigns, including any subsequent
holder of this Warrant to whom it has been legally transferred.
"Warrant Stock" shall mean the shares of the Company's Preferred Stock
purchasable by the holder of this Warrant upon the exercise of such Warrant, as
determined in accordance with Section 2.
Section 2. Warrant Stock. This Warrant shall be exercisable for One
Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three
(1,333,333) shares of Preferred Stock.
Section 3. Exercise of Warrant.
(a) Prior to April 4, 2012 (the Expiration Date"), Purchaser
may at any time and from time to time exercise this Warrant, in whole
or in part.
(i) The Warrantholder shall exercise this Warrant by
means of delivering to the Company at its principal place of
business the following: (A) a written notice of exercise,
including the number of shares of Warrant Stock to be
delivered pursuant to such exercise, pursuant to a
subscription form substantially in the form of Exhibit A
attached hereto and made a part hereof ("Subscription Form"),
(B) this Warrant and (C) payment equal to the Exercise Price
in accordance with Section 3(a)(ii). In the event that any
exercise shall not be for all shares of Warrant Stock
purchasable hereunder, a new Warrant registered in the name of
the Warrantholder, of like tenor to this Warrant and for the
remaining shares of Warrant Stock purchasable hereunder, shall
be delivered to the Warrantholder within five (5) days of any
such exercise.
(ii) The Warrantholder may elect to pay the Exercise
Price to the Company either (A) by cash, certified check or
wire transfer, (B) by converting the Warrant into Warrant
Stock ("Warrant Conversion"), or (C) any combination of the
foregoing, and specifying such election(s) in the Subscription
Form. If the Warrantholder elects to pay the Exercise Price
through Warrant Conversion, upon the exercise hereof the
Warrantholder shall specify in the Subscription Form that the
Company is authorized to withhold from issuance a number of
shares of Warrant Stock which, when multiplied by the fair
market value per share of the Warrant Stock on the date of
exercise, is equal to the aggregate Exercise Price (and such
withheld shares shall no longer be issuable under this
Warrant).
(b) Upon exercise of this Warrant and delivery of the
Subscription Form with proper payment relating thereto, the Company
shall cause to be executed and delivered to the Warrantholder a
certificate or certificates representing the aggregate number of fully
paid and nonassessable shares of Warrant Stock issuable upon such
exercise.
(c) The stock certificate or certificates for Warrant Stock to
be delivered in accordance with this Section 3 shall be in such
denominations as may be specified in said notice of exercise and shall
be registered in the name of the Warrantholder or such other name or
names as shall be designated in said notice. Such certificate or
certificates shall be deemed to have been issued and the Warrantholder
or any other person so designated to be named therein shall be deemed
to have become the holder of record of such shares of Warrant Stock,
including to the extent permitted by law the right to vote such shares
of Warrant Stock or to consent or to receive notice as a shareholder of
the Company, as of the time said notice is delivered to the Company as
aforesaid.
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(d) The Company shall pay all expenses payable in connection
with the preparation, issuance and delivery of stock certificates under
this Section 3, including any transfer taxes resulting from the
exercise of the Warrant and the issuance of Warrant Stock hereunder.
(e) All shares of Warrant Stock issuable upon the exercise of
this Warrant in accordance with the terms hereof shall be validly
issued, fully paid and nonassessable, and free from all liens and other
encumbrances thereon, other than liens or other encumbrances created by
the Warrantholder.
(f) In no event shall any fractional share of Warrant Stock of
the Company be issued upon any exercise of this Warrant. If, upon any
exercise of this Warrant, the Warrantholder would, except as provided
in this paragraph, be entitled to receive a fractional share of Warrant
Stock, then the Company shall deliver in cash to such holder an amount
equal to the fair market value of such fractional interest.
Section 4. Adjustment of Exercise Price and Warrant Stock.
(a) If, at any time prior to the Expiration Date, the number
of outstanding shares of Preferred Stock is (i) increased by a stock
dividend payable in shares of Preferred Stock or by a subdivision or
split-up of shares of Preferred Stock or (ii) decreased by a
combination of shares of Preferred Stock, then, following the record
date fixed for the determination of holders of Preferred Stock entitled
to receive the benefits of such stock dividend, subdivision, split-up,
or combination, the Exercise Price shall be adjusted to a new amount
equal to the product of (I) the Exercise Price in effect on such record
date and (II) the quotient obtained by dividing (x) the number of
shares of Preferred Stock outstanding on such record date (without
giving effect to the event referred to in the foregoing clause (i) or
(ii)), by (y) the number of shares of Preferred Stock which would be
outstanding immediately after the event referred to in the foregoing
clause (i) or (ii), if such event had occurred immediately following
such record date.
(b) Upon each adjustment of the Exercise Price as provided in
Section 4(a), the Warrantholder shall thereafter be entitled to
subscribe for and purchase, at the Exercise Price resulting from such
adjustment, the number of shares of Warrant Stock equal to the product
of (i) the number of shares of Warrant Stock existing prior to such
adjustment and (ii) the quotient obtained by dividing (I) the Exercise
Price existing prior to such adjustment by (II) the new Exercise Price
resulting from such adjustment.
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Section 5. Division and Combination. This Warrant may be divided or
combined with other Warrants upon presentation at the aforesaid office of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by the Warrantholder or its agent
or attorney. The Company shall pay all expenses in connection with the
preparation, issue and delivery of Warrants under this Section 5, including any
transfer taxes resulting from the division or combination hereunder. The Company
agrees to maintain, at its aforesaid office, books for the registration of the
Warrants.
Section 6. Reclassification, Etc. In case of any reclassification or
change of the outstanding Preferred Stock of the Company (other than as a result
of a subdivision, combination or stock dividend), or in case of any
consolidation of the Company with, or merger of the Company into, another
corporation or other business organization (other than a consolidation or merger
in which the Company is the continuing corporation and which does not result in
any reclassification or change of the outstanding Preferred Stock of the
Company) at any time prior to the Expiration Date, then, as a condition of such
reclassification, reorganization, change, consolidation or merger, lawful
provisions shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Warrantholder, so that
the Warrantholder shall have the right prior to the Expiration Date to purchase,
at a total price not to exceed that payable upon the exercise of this Warrant,
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, reorganization, change, consolidation or
merger by a holder of the number of shares of Warrant Stock of the Company which
might have been purchased by the Warrantholder immediately prior to such
reclassification, reorganization, change, consolidation or merger, in any such
case appropriate provisions shall be made with respect to the rights and
interest of the Warrantholder to the end that the provisions hereof (including
provisions for the adjustment of the Exercise Price and of the number of shares
purchasable upon exercise of this Warrant) shall thereafter be applicable in
relation to any shares of stock and other securities and property thereafter
deliverable upon exercise hereof.
Section 7. Reservation and Authorization of Capital Stock. The Company
shall have reserved and made available for issuance such number of its
authorized but unissued shares of Preferred Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants.
Section 8. Stock and Warrant Books. The Company will not at any time,
except upon dissolution, liquidation or winding up, close its stock books or
Warrant books so as to result in preventing or delaying the exercise of any
Warrant.
Section 9. Limitation of Liability. No provisions hereof, in the
absence of affirmative action by the Warrantholder to purchase Warrant Stock
hereunder, shall give rise to any liability of the Warrantholder to pay the
Exercise Price or as a shareholder of the Company (whether such liability is
asserted by the Company or creditors of the Company).
Section 10. Registration Rights. The Warrant Stock issuable upon the
exercise of this Warrant shall have registration rights and related obligations
identical to those of the "Registrable Securities" as set forth in the
Registration Rights Agreements, as may be amended, restated or modified from
time to time, by and among the Company and the parties identified therein, and
the parties hereto shall each execute such agreements, documents and instruments
in
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connection therewith, and the Company shall take such action, as reasonably
requested in order to fulfill the purposes of this Section 10.
Section 11. Transfer. Subject to compliance with the Securities Act and
the applicable rules and regulations promulgated thereunder, this Warrant and
all rights hereunder shall be transferable in whole or in part. Any such
transfer shall be made at the office or agency of the Company at which this
Warrant is exercisable, by the registered holder hereof in person or by its duly
authorized attorney, upon surrender of this Warrant together with the assignment
hereof properly endorsed, and promptly thereafter a new warrant shall be issued
and delivered by the Company, registered in the name of the assignee. Until
registration of transfer hereof on the books of the Company, the Company may
treat the Purchaser as the owner hereof for all purposes.
Section 12. Investment Representations; Restrictions on Transfer of
Warrant Stock. Unless a current registration statement under the Securities Act
shall be in effect with respect to the Warrant Stock to be issued upon exercise
of this Warrant, the Warrantholder, by accepting this Warrant, covenants and
agrees that, at the time of exercise hereof, and at the time of any proposed
transfer of Warrant Stock acquired upon exercise hereof, such Warrantholder will
deliver to the Company a written statement that the securities acquired by the
Warrantholder upon exercise hereof are for the account of the Warrantholder or
are being held by the Warrantholder as trustee, investment manager, investment
advisor or as any other fiduciary for the account of the beneficial owner or
owners for investment and are not acquired with a view to, or for sale in
connection with, any distribution thereof (or any portion thereof) and with no
present intention (at any such time) of offering and distributing such
securities (or any portion thereof). Any shares of Warrant Stock or shares of
Common Stock shall bear a legend substantially similar to the legend on the face
of this Warrant.
Section 13. Loss, Destruction of Warrant Certificates. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity and/or security satisfactory to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company will make and 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 of
Warrant Stock.
Section 14. Amendments. The terms of this Warrant may be amended, and
the observance of any term herein may be waived, but only with the written
consent of the Company and the Warrantholder.
Section 15. Notices Generally. Any notice, request, consent, other
communication or delivery shall be made to the Warrantholder and/or the Company,
as the case may be, at the addresses set forth in the records of the Company and
the principal place of business of the Company, respectively.
Section 16. Successors and Assigns. This Warrant shall bind and inure
to the benefit of and be enforceable by the parties hereto and their respective
permitted successors and assigns.
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Section 17. Governing Law. In all respects, including all matters of
construction, validity and performance, this Warrant and the obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of Illinois applicable to contracts made and performed in
such State.
[SIGNATURE PAGE FOLLOWS]
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WARRANT SIGNATURE PAGE
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its President.
Dated: April 4, 2003
EPICEDGE, INC.
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: COO, CFO and Secretary
EXHIBIT A
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SUBSCRIPTION FORM
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(to be executed only upon exercise of Warrant)
To: ______________
[CHOOSE ONE OR BOTH OF THE PARAGRAPHS, AS APPLICABLE]
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. __ ), hereby irrevocably elects to purchase __________ shares of
the Warrant Stock covered by such Warrant and herewith makes payment of
$__________, representing the full purchase price for such shares at the price
per share provided for in such Warrant.
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. __ ), hereby irrevocably elects to exercise the right of conversion
represented by the attached Warrant for ____ shares of Warrant Stock, and as
payment therefor hereby directs ____________ to withhold ____ shares of Warrant
Stock that the undersigned would otherwise be entitled thereunder.
Dated: Name:
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Signature:
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Address:
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